Balance sheets after the EMU: an assessment of the redenomination risk

Cédric Durand and Sébastien Villemot

No 2016-31, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: The probability of a partial or complete break-up of the euro has risen over the last years. Such an event could create a balance sheet problem for economic agents, since the redenomination process could introduce significant currency mismatches between the asset and liability sides. We propose a new assessment of this redenomination risk, by country and by main institutional sector, for two scenarios: a single country exit and a complete break-up. Our main conclusion is that, even though the problem has to be taken seriously, its order of magnitude should not be exaggerated. Only a few sectors are at significant risk: public debts of Greece and Portugal, financial sectors of Greece, Ireland and Luxembourg. In particular, the consequences for the nonfinancial private sector should be manageable. We provide policy recommendations aiming at limiting the risk ex ante, and mitigating the consequences ex post.

Keywords: Euro; balance sheet; risk; public debts (search for similar items in EconPapers)
Date: 2016-10
New Economics Papers: this item is included in nep-eec
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Citations: View citations in EconPapers (9)

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http://www.ofce.sciences-po.fr/pdf/dtravail/WP2016-31.pdf (application/pdf)

Related works:
Working Paper: Balance sheets after the EMU: an assessment of the redenomination risk (2020)
Working Paper: Balance sheets after the EMU: an assessment of the redenomination risk (2020)
Working Paper: Balance sheets after the EMU: an assessment of the redenomination risk (2020)
Working Paper: Balance Sheets after the EMU: an Assessment of the Redenomination Risk (2016)
Working Paper: Balance sheets after the EMU: an assessment of the redenomination risk (2016)
Working Paper: Balance sheets after the EMU: an assessment of the redenomination risk (2016)
Working Paper: Balance Sheets after the EMU: an Assessment of the Redenomination Risk (2016)
Working Paper: Balance sheets after the EMU: an assessment of the redenomination risk (2016)
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