How to Abandon the Common Currency in Exchange for a New National Currency

39 Pages Posted: 6 Oct 2016 Last revised: 24 Dec 2016

Tuomas Malinen

HECER, University of Helsinki

Peter Nyberg

Independent

Heikki Koskenkylä

Bank of Finland

Elina Berghäll

VATT Institute for Economic Research

Ilkka Mellin

Aalto University

Sami Miettinen

Independent

Jukka Ala-Peijari

Independent

Stefan Törnqvist

Independent

Date Written: October 4, 2016

Abstract

The question of how to leave a monetary union has become an important economic issue during the last few years. Uncertainty relating to its costs tends to discourage political leaders from taking decisive steps towards an exit. This article provides thoughts on what the necessary steps are, what are the associated pitfalls, how they can be overcome, and how can an exit from a currency union be effectively managed to control associated risks and costs. Uninterrupted functioning of the payments system, political response and the solvency of the private and public institutions are shown to be the major determinants of the costs of an exit. Issues of public governance, such as legality of the exit, can become an issue only if political and public support for the exit is lacking.

Keywords: monetary union, domestic currency, exchange rate

JEL Classification: E61, F45, H12

Suggested Citation

Malinen, Tuomas and Nyberg, Peter and Koskenkylä, Heikki and Berghäll and Mellin, Ilkka and Miettinen, Sami and Ala-Peijari, Jukka and Törnqvist, Stefan, How to Abandon the Common Currency in Exchange for a New National Currency (October 4, 2016). Available at SSRN: https://ssrn.com/abstract=2847507 or http://dx.doi.org/10.2139/ssrn.2847507

Tuomas Malinen (Contact Author)

HECER, University of Helsinki ( email )

Helsinki, 00014
Finland

Peter Nyberg

Independent ( email )

No Address Available

Heikki Koskenkylä

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Elina Berghäll

VATT Institute for Economic Research ( email )

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

HOME PAGE: http://www.vatt.fi

Ilkka Mellin

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland

Sami Miettinen

Independent ( email )

No Address Available

Jukka Ala-Peijari

Independent ( email )

No Address Available

Stefan Törnqvist

Independent ( email )

No Address Available

Paper statistics

Downloads
1,006
Rank
16,797
Abstract Views
3,103