Haller, H. and Ioannides, Y. (1995) Monetary union or else? CEPDP, 207. Centre for Economic Performance, London School of Economics and Political Science, London, UK.Full text not available from this repository.
We analyze a strategic game where in a first step, a country can adopt another country''s currency. In a second step, thee two countries commit resources to economic integration. A common currency reduces the overall resource costs of economic integration, but imposes an idiosyncratic adjustment cost on the country changing its currency. A country''s currency choice depends on how, favorably or adversely, it expects the other country to respond to a currency change. We find that economic integration without a common currency is a subgame perfect equilibrium outcome. Economic integration with a common currency is another, superior subgame perfect equilibrium outcome.
|Item Type:||Monograph (Discussion Paper)|
|Additional Information:||© 1995 the authors|
|Library of Congress subject classification:||H Social Sciences > HG Finance|
|Sets:||Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
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