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The Strategic Euro Laggards

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Abstract

A government applying for a club membership may strategically delay entry to cope with the hold-up problem introduced by anticipatory investments of the private sector. In equilibrium of a two-period incomplete information game, we find that a pro-entry government may strategically delay to imitate an anti-entry government and thereby affect expectations of the private sector. The delay is more likely if the government has a good electoral prospect, is internationally weak, and is not considered to be too keen on entry. The model is related to the case of the Czech Republic where the government recently softened commitment in the euro adoption strategy.

Suggested Citation

  • Martin Gregor, 2008. "The Strategic Euro Laggards," Working Papers IES 2008/16, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Sep 2008.
  • Handle: RePEc:fau:wpaper:wp2008_16
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    File URL: http://ies.fsv.cuni.cz/default/file/download/id/8912
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    Keywords

    EMU; club enlargement; international unions; bargaining;

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General

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