Institutionalizing Eurozone Exit: A Modified NEWNEY Approach

8 Pages Posted: 22 Feb 2013

See all articles by Steffen Huck

Steffen Huck

University College London - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Justin Valasek

Norwegian School of Economics (NHH)

Date Written: February 21, 2013

Abstract

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

Huck, Steffen and Valasek, Justin, Institutionalizing Eurozone Exit: A Modified NEWNEY Approach (February 21, 2013). CESifo Working Paper Series No. 4116. Available at SSRN: https://ssrn.com/abstract=2221855

Steffen Huck

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
+44 207 679 5895 (Phone)
+44 207 916 2774 (Fax)

HOME PAGE: http://www.ucl.ac.uk/~uctpshu/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Justin Valasek (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

Register to save articles to
your library

Register

Paper statistics

Downloads
56
Abstract Views
328
rank
364,225
PlumX Metrics