Working Paper: NBER ID: w17908
Authors: Russell Cooper
Abstract: This paper studies the role of exit from a monetary union during a debt crisis. A monetary union, such as the European Monetary Union, needs to establish a procedure for exit as a tool to cope with debt default. The paper studies various forms of exit and argues that "Euroization" is both a credible and effective means of punishment for countries in default.
Keywords: Monetary Union; Euroization; Debt Crisis; Fiscal Discipline; Exit Strategies
JEL Codes: E02; E58; E61; E63; F33; F34; F36
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| euroization (F36) | fiscal discipline (E62) |
| euroization (F36) | credible punishment for defaulting countries (F34) |
| credible punishment for defaulting countries (F34) | incentive to avoid excessive fiscal expansion (E62) |
| euroization (F36) | influence over monetary policy (E58) |
| euroization (F36) | less chaotic alternative to complete exit from monetary union (F36) |
| central bank decisions regarding bailouts (E58) | fiscal behavior of defaulting country (E62) |
| euroization (F36) | decision-making of member states regarding fiscal policy (F42) |