When a Monetary Union Fails: A Parable |
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Authors: | Cheikbossian Guillaume |
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Institution: | (1) Manufacture des Tabacs, Université de Perpignan et GREMAQ, Université des Sciences Sociales, 21 allée de Brienne, F-31000 Toulouse, France |
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Abstract: | The political imperative is an important driving force behind the dissolution of monetary unions. But economic factors are also likely to play an important role. Using a two-country model of government finance in a common currency area, we suggest that when countries are very heterogeneous in terms of financing requirements or in terms of tolerance for inflation, one of them will benefit from achieving monetary independence. The results are contrasted to the breakup of the Austro-Hungarian crown area in the 1920s and especially to that of the ruble area in the 1990s. |
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Keywords: | monetary union seignbrage disintegration Soviet Republic Astro-Hungarian crown |
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