Monetary Union, Asymmetric Recession, and Exit

Type
working paper
Date Issued
2022
Author(s)
;
Kirschner, Linda
;
;
Abstract (De)
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.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Publisher
Universität St. Gallen Department of Economics Discussion Paper
Number
Nr. 2022-06 (revised 2023)
URL
Subject(s)

economics

Division(s)

SEPS - School of Econ...

University of St.Gall...

FGN - Institute of Ec...

Eprints ID
266805
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