The Strategic Euro Laggards

Martin Gregor (martin.gregor@fsv.cuni.cz)

No 2008/16, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: A government applying for a club membership may strategically delay entry to cope with the hold-up problem introduced by anticipatory investments of the private sector. In equilibrium of a two-period incomplete information game, we find that a pro-entry government may strategically delay to imitate an anti-entry government and thereby affect expectations of the private sector. The delay is more likely if the government has a good electoral prospect, is internationally weak, and is not considered to be too keen on entry. The model is related to the case of the Czech Republic where the government recently softened commitment in the euro adoption strategy.

Keywords: EMU; club enlargement; international unions; bargaining (search for similar items in EconPapers)
JEL-codes: D74 E42 F31 F50 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2008-09, Revised 2008-09
New Economics Papers: this item is included in nep-mac and nep-mon
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