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The Sustainability of Monetary Unions - Can the Euro Survive?Paolo Canofariaffiliation not provided to SSRN Giancarlo MariniUniversity of Rome II - Faculty of Economics Giovanni PiersantiUniversity of Rome II - Department of Economics and Law March 27, 2012 CEIS Working Paper No. 226 Abstract: This paper aims to propose a new measure of exchange market pressure for countries operating in hard peg regimes, such as currency unions, currency boards or full dollarization. We use a general model of currency crisis to derive a sustainability index based upon the relationship between the shadow exchange rate and the output gap required to maintain the currency peg. We apply the new index to European Union countries in order to assess the sustainability of the Euro.
Number of Pages in PDF File: 27 Keywords: shadow exchange rate, currency crisis, exchange market pressure JEL Classification: F3, F31, F41, G01 working papers seriesDate posted: March 27, 2012 ; Last revised: July 23, 2012Suggested CitationContact Information
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