Institutionalizing Eurozone Exit: A Modified NEWNEY Approach
8 Pages Posted: 22 Feb 2013
Date Written: February 21, 2013
In this note, we argue that the Eurozone needs an institutional exit mechanism to enhance Eurozone stability, and propose modifications to the Dobbs' NEWNEY mechanism, the only mechanism that satisfies the twin properties of eliminating incentives for intra-Eurozone capital flight and maintaining Eurozone price stability. Our modifications eliminate moral hazard, allow for a fair distribution of costs (between and within countries) and are also appropriate for the exit of a fiscally strong country.
Keywords: Eurozone, Eurozone exit, price stability
JEL Classification: E440, E520
Suggested Citation: Suggested Citation