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Institutionalizing eurozone exit: A modified NEWNEY approach

  • Huck, Steffen
  • Valasek, Justin Mattias

In this note, we argue that the Eurozone needs an institutional exit mechanism to enhance Eurozone stability, and propose modifications to the Dobbs' NEWNEY mechanism, the only mechanism that satisfies the twin properties of eliminating incentives for intra-Eurozone capital flight and maintaining Eurozone price stability. Our modifications eliminate moral hazard, allow for a fair distribution of costs (between and within countries) and are also appropriate for the exit of a fiscally strong country.

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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Economics of Change with number SP II 2012-304.

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Date of creation: 2012
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Handle: RePEc:zbw:wzbeoc:spii2012304
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  1. Sinn, Hans-Werner, 2012. "Target losses in case of a Euro breakup," Munich Reprints in Economics 19622, University of Munich, Department of Economics.
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