A Nash Threat Game of Passing Through Exchange Rate Mechanism II
AbstractFollowing entrance into the European Union, Central Eastern European Countries (CEECs) are expected to join the European Monetary Union (EMU). These countries may incur considerable costs over the course of their passing through the required Exchange Rate Mechanism II (ERM-II). However, with enough bargaining leverage CEECs may be able to pass some of these costs on to current EMU-members. In turn, a CEEC's leverage depends on their ability to wield successful brinkmanship via an exchange-rate policy characterized by a 'threaten-thy-neighbor' strategy. A two-stage Nash-threat game captures the essentials of the CEECs' phase of ERM-II pass through.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2007-050.
Date of creation: 22 Aug 2007
Date of revision:
Threat game; Nash-bargaining solution; exchange-rate policy; EU-enlargement; EMU;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-27 (All new papers)
- NEP-CBA-2007-08-27 (Central Banking)
- NEP-EEC-2007-08-27 (European Economics)
- NEP-GTH-2007-08-27 (Game Theory)
- NEP-IFN-2007-08-27 (International Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Barry Nalebuff, 1986. "Brinkmanship and Nuclear Deterrence: The Neutrality of Escalation," Conflict Management and Peace Science, Peace Science Society (International), Peace Science Society (International), vol. 9(2), pages 19-30, February.
- Richard E. Baldwin & Joseph F. Francois & Richard Portes, 1997. "The costs and benefits of eastern enlargement: the impact on the EU and central Europe," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 12(24), pages 125-176, 04.
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