Advanced Search
MyIDEAS: Login

Sovereign Default and the Euro

Contents:

Author Info

  • Karl Whelan

    (University College Dublin)

Abstract

The introduction of the euro meant that countries with sovereign debt problems could not use monetisation and devaluation as a way to prevent default. The institutional structures of the euro were also widely thought to prevent a country in difficulties being bailed out by other euro members or having its sovereign debt purchased by the ECB. Despite these restrictions, there was relatively little discussion about sovereign default in pre-EMU debates among economists and financial markets priced in almost no default risk in the pre-crisis years. The crisis has seen bailouts and bond purchases by the ECB but there has also been a sovereign default inside the euro and further defaults seem likely. The introduction of the euro was intended to bring greater stability by ending devaluations triggered by self-fulfilling runs on a currency. While this particular scenario can no longer happen, this paper discusses mechanisms whereby expectations that a country may leave the euro can lead to this outcome occurring.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ucd.ie/t4cms/WP13_09.pdf
File Function: First version, 2013
Download Restriction: no

Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 201309.

as in new window
Length: 29 pages
Date of creation: 25 Jul 2013
Date of revision:
Handle: RePEc:ucn:wpaper:201309

Contact details of provider:
Postal: UCD, Belfield, Dublin 4
Phone: +353-1-7067777
Fax: +353-1-283 0068
Web page: http://www.ucd.ie/economics
More information through EDIRC

Related research

Keywords: Euro Crisis; Sovereign Default;

Other versions of this item:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
  2. Jeffrey Sachs & Aaron Tornell & Andres Velasco, 1996. "The Mexican Peso Crisis: Sudden Death or Death Foretold?," Harvard Institute of Economic Research Working Papers 1760, Harvard - Institute of Economic Research.
  3. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  4. Tony Makin, 1993. "Capital Market Integration and National Wealth," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 26(2), pages 61-70.
  5. Blanco, Herminio & Garber, Peter M, 1986. "Recurrent Devaluation and Speculative Attacks on the Mexican Peso," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 148-66, February.
  6. Helmut Reisen, 1998. "Sustainable and Excessive Current Account Deficits," OECD Development Centre Working Papers 132, OECD Publishing.
  7. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
  8. Menzie D. Chinn, 1998. "On the Won and Other East Asian Currencies," NBER Working Papers 6671, National Bureau of Economic Research, Inc.
  9. Goldberg, Linda S., 1994. "Predicting exchange rate crises : Mexico revisited," Journal of International Economics, Elsevier, vol. 36(3-4), pages 413-430, May.
  10. Guillermo A. Calvo & Enrique G. Mendoza, 1996. "Mexico's balance-of-payments crisis: a chronicle of death foretold," International Finance Discussion Papers 545, Board of Governors of the Federal Reserve System (U.S.).
  11. Obstfeld, Maurice, 1996. "Models of Currency Crises with Self-fulfilling Features," CEPR Discussion Papers 1315, C.E.P.R. Discussion Papers.
  12. Harold L. Cole & Timothy J. Kehoe, 1996. "A self-fulfilling model of Mexico's 1994-95 debt crisis," Staff Report 210, Federal Reserve Bank of Minneapolis.
  13. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
  14. Jeffrey R. Shafer & Bonnie E. Loopesko, 1983. "Floating Exchange Rates after Ten years," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(1), pages 1-86.
  15. A. J. Makin, 1989. "Is the Current Account Deficit Sustainable?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 22(2), pages 29-33.
  16. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
  17. Asea, Patrick K & Mendoza, Enrique G, 1994. "The Balassa-Samuelson Model: A General-Equilibrium Appraisal," Review of International Economics, Wiley Blackwell, vol. 2(3), pages 244-67, October.
  18. John Page, 1994. "The East Asian Miracle: Four Lessons for Development Policy," NBER Chapters, in: NBER Macroeconomics Annual 1994, Volume 9, pages 219-282 National Bureau of Economic Research, Inc.
  19. Samuelson, Paul A, 1994. "Facets of Balassa-Samuelson Thirty Years Later," Review of International Economics, Wiley Blackwell, vol. 2(3), pages 201-26, October.
  20. Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, vol. 17(1-2), pages 1-13, August.
  21. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
  22. Paul Krugman, 1996. "Are Currency Crises Self-Fulfilling?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 345-407 National Bureau of Economic Research, Inc.
  23. Calvo, Guillermo A, 1996. "Capital Flows and Macroeconomic Management: Tequila Lessons," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 1(3), pages 207-23, July.
  24. Heston, Alan & Nuxoll, Daniel A & Summers, Robert, 1994. "The Differential-Productivity Hypothesis and Purchasing-Power Parties: Some New Evidence," Review of International Economics, Wiley Blackwell, vol. 2(3), pages 227-43, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Aidan Regan, 2014. "What Explains Ireland’s Fragile Recovery from the Crisis? The Politics of Comparative Institutional Advantage," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 15(2), pages 26-31, 04.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ucn:wpaper:201309. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nicolas Clifton).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.