The Bail-Out! Positive Political Economics of Greek-Type Crises in the Emu

Fahrholz, Christian; Wójcik, Cezary

doi:10.1142/s179399331250010x

Cited by 2 publications

(2 citation statements)

References 23 publications

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“…A political‐economy analysis shows that exit rules would quench the burning ends of the fuses and would provide additional benefits (Fahrholz and Wójcik, , ). First, if exiting the Eurozone were openly allowed, the markets would have no choice but to price non‐zero probability into their risk assessment and thus better differentiate – not only in crisis times, but also in good times – country risk among Eurozone sovereign bonds.…”

Section: Exit Rulesmentioning

confidence: 99%

Can the Euro Survive?

Haidar

2014

World Economy

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One of the fascinating aspects of the European debt crisis has been the resilience of the euro. For much of 2011, the euro was a key reserve currency, oblivious to the chaos ravaging European economies. Now, however, the gravity of the crisis is finally dragging down the euro. As the Euro zone debt crisis enters its third uncertain year, the question about whether the euro can survive rises. This paper argues that the euro can survive given policymakers still have in hand various tools. These tools include creating exit rules, implementing new stabilisation rules and instruments, adopting new fiscal policy, introducing conditional Eurobonds, using inflation differentials and providing more independence to the European Central Bank.

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Section: Exit Rulesmentioning

confidence: 99%

Can the Euro Survive?

Haidar

2014

World Economy

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“…In doing so, we rely on Fahrholz (2007); further, e.g., Fahrholz and Wójcik (2012) and Arghyrou and Tsoukalas (2010) deal particularly with the Greek sovereign debt crisis.…”

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confidence: 99%

The Eurozone needs exit rules

Fahrholz¹,

Wójcik²

2013

Journal of Banking & Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Eurozone Needs Exit Rules Abstract This paper argues that the key issue for defining and solving the Eurozone's (EZ) difficulties lies in readjusting the relationship between the centre and the periphery of the EZ. Our argument proceeds in two steps. Firstly, the basic finance problem of a centre-periphery system is captured by a threat game with perfect but incomplete information. To get close to the essence of today's crisis we analyze to what extent a 'troubled' periphery EZ member can negotiate a bailout from the center due to the existence of a negative externality arising from its potential default. Secondly, we analyze how establishing 'exit rules', which have recently also been advocated by Jacques Delors, would shift the centre-periphery relationship in a way that safeguard the stability of the EZ. We demonstrate that such rules may help limiting the scope for brinkmanship whereby fiscal problems in one member create a negative externality for the rest of the EZ. We show that such rules will strengthen the EZ through at least four channels. Terms of use: Documents inJEL-Code: E620, F330, H770, C700.

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The Bail-Out! Positive Political Economics of Greek-Type Crises in the Emu

Cited by 2 publications

References 23 publications

Can the Euro Survive?

Can the Euro Survive?

The Eurozone needs exit rules

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