Have a Break, Have a ... National Currency: When Do Monetary Unions Fall Apart?

32 Pages Posted: 6 Feb 2004

See all articles by Volker Nitsch

Volker Nitsch

Darmstadt University of Technology - Department of Law and Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: January 2004

Abstract

Historically, dissolutions of currency unions are not unusual. I use an annual panel data set covering 245 country pairs that use a common currency (of which 128 are dissolved) from 1948 through 1997 to characterize currency union exits. I find that departures from a currency union tend to occur when there is a large inflation differential between member countries, when the currency union involves a country which is closed to international trade and trade flows dry up, and when there is a change in the political status of a member. In general, however, macroeconomic factors have only little predictive power for currency union dissolutions.

Keywords: monetary union, sovereign currency, dissolution, exit.

JEL Classification: F31, F33, F36

Suggested Citation

Nitsch, Volker, Have a Break, Have a ... National Currency: When Do Monetary Unions Fall Apart? (January 2004). Available at SSRN: https://ssrn.com/abstract=496002

Volker Nitsch (Contact Author)

Darmstadt University of Technology - Department of Law and Economics ( email )

Marktplatz 15
Residenzschloss
Darmstadt, 64283
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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