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Post-COVID-19 EMU: Economic Distancing by Parallel Currencies

Author

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  • Thomas Mayer

    (Flossbach von Storch Research Institute)

  • Gunther Schnabl

    (University of Leipzig)

Abstract

The coronavirus crisis has caused new distress in the European Economic and Monetary Union (EMU), as the southern part of the EMU has been hit stronger than the northern part. The common currency prevents nominal exchange rate adjustment in response to the asymmetric shock. Policymakers have therefore taken recourse to large-scale financial transfers. Based on the lessons from the German monetary union, this article proposes instead the introduction of parallel currencies to facilitate relative price changes. Parallel currencies in the south would allow an increase in competitiveness of the south via real depreciation. The introduction of a parallel currency in Germany would lead to capital inflows and a real appreciation of the new German mark. The pre-EMU pressure for structural adjustments and productivity gains would be restored.

Suggested Citation

  • Thomas Mayer & Gunther Schnabl, 2020. "Post-COVID-19 EMU: Economic Distancing by Parallel Currencies," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 55(6), pages 387-391, November.
    • Handle: RePEc:spr:intere:v:55:y:2020:i:6:d:10.1007_s10272-020-0939-4
    DOI: 10.1007/s10272-020-0939-4
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    References listed on IDEAS

    as
    1. Gunther Schnabl, 2017. "The Failure of ECB Monetary Policy from a Mises-Hayek Perspective," CESifo Working Paper Series 6388, CESifo.
    2. Hans-Werner Sinn & Timo Wollmershäuser, 2012. "Target loans, current account balances and capital flows: the ECB’s rescue facility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(4), pages 468-508, August.
    3. Mr. Michael Kumhof & Mr. Jaromir Benes, 2012. "The Chicago Plan Revisited," IMF Working Papers 2012/202, International Monetary Fund.
    4. Viral V Acharya & Tim Eisert & Christian Eufinger & Christian Hirsch, 2019. "Whatever It Takes: The Real Effects of Unconventional Monetary Policy," Review of Financial Studies, Society for Financial Studies, vol. 32(9), pages 3366-3411.
    5. Schnabl, Gunther & Sonnenberg, Nils, 2020. "Monetary policy, financial regulation and financial stability: A comparison between the Fed and the ECB," Working Papers 166, University of Leipzig, Faculty of Economics and Management Science.
    6. Schnabl, Gunther & Sepp, Tim, 2019. "30 Jahre nach dem Mauerfall: Ursachen für Konvergenz und Divergenz zwischen Ost- und Westdeutschland," Working Papers 162, University of Leipzig, Faculty of Economics and Management Science.
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    Cited by:

    1. Taiki Murai & Gunther Schnabl, 2021. "Macroeconomic Policy Making and Current Account Imbalances in the Euro Area," CESifo Working Paper Series 9153, CESifo.

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