This paper analyzes strategic interactions and contagion effects in the peripheral countries of a monetary union. Using game theory and cost-benefit analysis, the paper determines the set of equilibrium solutions under which country-specific shocks are transmitted to other member countries giving rise to contagion. Numerical simulations, obtained by a simple calibration of the model on some key Mediterranean countries of the Euro Zone, show the probabilities of contagion from Greece, Spain and Italy. © 2014 International Atlantic Economic Society.
Theory and Practice of Contagion in Monetary Unions: Domino Effects in EMU Mediterranean Countries / Canofari, Paolo; GIovanni Di, Bartolomeo; Giovanni, Piersanti. - In: INTERNATIONAL ADVANCES IN ECONOMIC RESEARCH. - ISSN 1083-0898. - 20:3(2014), pp. 259-267. [10.1007/s11294-014-9471-2]
Theory and Practice of Contagion in Monetary Unions: Domino Effects in EMU Mediterranean Countries
Canofari Paolo
Membro del Collaboration Group
;
2014
Abstract
This paper analyzes strategic interactions and contagion effects in the peripheral countries of a monetary union. Using game theory and cost-benefit analysis, the paper determines the set of equilibrium solutions under which country-specific shocks are transmitted to other member countries giving rise to contagion. Numerical simulations, obtained by a simple calibration of the model on some key Mediterranean countries of the Euro Zone, show the probabilities of contagion from Greece, Spain and Italy. © 2014 International Atlantic Economic Society.
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