Monetary Union, Asymmetric Recession, and Exit

Item Type Monograph (Working Paper)
Abstract We propose a New Keynesian DSGE model of the Eurozone and analyze an asymmetric recession in a vulnerable member state characterized by a trilemma of high public debt, weak banks, and deteriorating competitiveness. We compare macroeconomic adjustment under continued membership with two exit scenarios that introduce flexible exchange rates and autonomous monetary policy. An exit with stable investor expectations could significantly dampen the short-run impact. Stabilization is achieved by a targeted monetary expansion combined with depreciation. However, investor panic may lead to escalation, aggravate the recession and delay the recovery.
Authors Keuschnigg, Christian; Kirschner, Linda; Kogler, Michael & Winterberg, Hannah
Language English
Subjects economics
HSG Classification contribution to scientific community
HSG Profile Area SEPS - Economic Policy
Date 2022
Publisher Universität St. Gallen Department of Economics Discussion Paper
Number Nr. 2022-06 (revised 2023)
Depositing User Michael Kogler
Date Deposited 03 Aug 2022 08:55
Last Modified 26 Mar 2023 19:57
URI: https://www.alexandria.unisg.ch/publications/266805

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Citation

Keuschnigg, Christian; Kirschner, Linda; Kogler, Michael & Winterberg, Hannah: Monetary Union, Asymmetric Recession, and Exit. , 2022, Nr. 2022-06 (revised 2023).

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https://www.alexandria.unisg.ch/id/eprint/266805
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