Exit expectations and debt crises in currency unions / Alexander Kriwoluzky; Gernot J. Müller; Martin Wolf
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Discovery
840212682
URN
urn:nbn:de:gbv:3:2-49939
DOI
ISBN
ISSN
Autorin / Autor
Beiträger
Körperschaft
Erschienen
Halle (Saale) : Leibniz-Inst. für Wirtschaftsforschung - IWH, 2015
Umfang
Online-Ressource (PDF-Datei: III, 53 S., 1,83 MB) : graph. Darst.
Ausgabevermerk
Sprache
eng
Anmerkungen
Inhaltliche Zusammenfassung
Membership in a currency union is not irreversible. Exit expectations may emerge during sovereign debt crises, because exit allows countries to reduce their liabilities through a currency redenomination. As market participants anticipate this possibility, sovereign debt crises intensify. We establish this formally within a small open economy model of changing policy regimes. The model permits explosive dynamics of debt and sovereign yields inside currency unions and allows us to distinguish between exit expectations and those of an outright default. By estimating the model on Greek data, we quantify the contribution of exit expectations to the crisis dynamics during 2009 to 2012.
Schriftenreihe
IWH-Diskussionspapiere ; 2015,18 ppn:837399270