When a Monetary Union Fails: A Parable
The political imperative is an important driving force behind the dissolution of monetary unions. But economic factors are also likely to play an important role. Using a two-country model of government finance in a common currency area, we suggest that when countries are very heterogeneous in terms of financing requirements or in terms of tolerance for inflation, one of them will benefit from achieving monetary independence. The results are contrasted to the breakup of the Austro-Hungarian crown area in the 1920s and especially to that of the ruble area in the 1990s. Copyright Kluwer Academic Publishers 2001
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.:
- Aizenman, Joshua, 1992. "Competitive Externalities and the Optimal Seigniorage," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(1), pages 61-71, February.
- Casella, Alessandra, 1990.
"Participation in a Currency Union,"
CEPR Discussion Papers
395, C.E.P.R. Discussion Papers.
- Michael G. Spencer & Peter M. Garber, 1992. "The Dissolution of the Austro-Hungarian Empire; Lessons for Currency Reform," IMF Working Papers 92/66, International Monetary Fund.
- Hamada, Koichi, 1976. "A Strategic Analysis of Monetary Interdependence," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 677-700, August.
- Alessandra Casella and Jonathan Feinstein., 1988.
"Management of a Common Currency,"
Economics Working Papers
8891, University of California at Berkeley.
- Casella, Alessandra & Feinstein, Jonathan, 1988. "Management of a Common Currency," Department of Economics, Working Paper Series qt5jv1h7nt, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Alessandra Casella & Jonathan Feinstein, 1988. "Management of a Common Currency," NBER Working Papers 2740, National Bureau of Economic Research, Inc.
- Rudiger Dornbusch, 1992. "Monetary problems of post-communism: Lessons from the end of the Austro-Hungarian empire," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 128(3), pages 391-424, September.
- HernÃ¡n CortÃ©s Douglas & Richard K. Abrams, 1993. "Introduction of a New National Currency; Policy, Institutional, and Technical Issues," IMF Working Papers 93/49, International Monetary Fund.
- Glasner,David, 1989. "Free Banking and Monetary Reform," Cambridge Books, Cambridge University Press, number 9780521361750, November.
- Andrabi, Tahir, 1997. "Seigniorage, Taxation, and Weak Government," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 106-26, February.
When requesting a correction, please mention this item's handle: RePEc:kap:openec:v:12:y:2001:i:2:p:181-195. 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: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.