This paper proposes a 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 index to European Union countries in order to assess the sustainability of the euro.
Measuring Currency Pressure and Contagion Risks in Countries under Monetary Unions: The Case of Euro / Canofari, Paolo; Marini, Giancarlo; Piersanti, Giovanni. - In: ATLANTIC ECONOMIC JOURNAL. - ISSN 0197-4254. - 42:4(2014), pp. 455-469. [10.1007/s11293-014-9434-2]
Measuring Currency Pressure and Contagion Risks in Countries under Monetary Unions: The Case of Euro
Canofari Paolo
Membro del Collaboration Group
;
2014
Abstract
This paper proposes a 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 index to European Union countries in order to assess the sustainability of the euro.File | Dimensione | Formato | |
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