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Have a Break, Have a ... National Currency: When Do Monetary Unions Fall Apart?

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  • Volker Nitsch

Abstract

Historically, dissolutions of currency unions are not unusual. I use an annual panel data set covering 245 country pairs that use a common currency (of which 128 are dissolved) from 1948 through 1997 to characterize currency union exits. I find that departures from a currency union tend to occur when there is a large inflation differential between member countries, when the currency union involves a country which is closed to international trade and trade flows dry up, and when there is a change in the political status of a member. In general, however, macroeconomic factors have only little predictive power for currency union dissolutions.

Suggested Citation

  • Volker Nitsch, 2004. "Have a Break, Have a ... National Currency: When Do Monetary Unions Fall Apart?," CESifo Working Paper Series 1113, CESifo.
    • Handle: RePEc:ces:ceswps:_1113
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. La prevalenza del declino
      by Alberto Bagnai in Goofynomics on 2013-02-17 00:13:00
    2. Unioni monetarie e integrazione economica
      by Alberto Bagnai in Goofynomics on 2016-03-28 14:23:00
    3. Debito pubblico: quelli che ‘la monetizzazione si fa coi miniassegni…’
      by Alberto Bagnai in Il Fatto Quotidiano on 2014-04-08 11:52:45
    4. Uscita dall’euro: quelli che ‘la benzina andrebbe a 3000 lire’
      by Alberto Bagnai in Il Fatto Quotidiano on 2015-01-06 20:04:31

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    Cited by:

    1. Carsten Hefeker & Michael Neugart, 2015. "Fiscal Transfers in a Monetary Union with Exit Option," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 489-508, August.
    2. Montalbano, Pierluigi & Nenci, Silvia & Dell'Agostino, Laura, 2022. "A non-parametric assessment of the effects of the Euro on GVC trade," International Economics, Elsevier, vol. 172(C), pages 56-76.
    3. Giuseppe Bertola & John Driffill & Harold James & Hans-Werner Sinn & Jan-Egbert Sturm & Ákos Valentinyi, 2013. "Chapter 2: European Imbalances," EEAG Report on the European Economy, CESifo, vol. 0, pages 55-72, February.
    4. Pomfret, Richard, 2005. "Sequencing trade and monetary integration: issues and application to Asia," Journal of Asian Economics, Elsevier, vol. 16(1), pages 105-124, February.
    5. Becker, Bettina & Hall, Stephen G., 2009. "How far from the Euro Area? Measuring convergence of inflation rates in Eastern Europe," Economic Modelling, Elsevier, vol. 26(4), pages 788-798, July.

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    Keywords

    monetary union; sovereign currency; dissolution; exit;
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