Theory and Practice of Contagion in Monetary Unions: Domino Effects in EMU Mediterranean Countries

Paolo Canofari, Giovanni Di Bartolomeo () and Giovanni Piersanti

International Advances in Economic Research, 2014, vol. 20, issue 3, 259-267

Abstract: This paper analyzes strategic interactions and contagion effects in the peripheral countries of a monetary union. Using game theory and cost-benefit analysis, the paper determines the set of equilibrium solutions under which country-specific shocks are transmitted to other member countries giving rise to contagion. Numerical simulations, obtained by a simple calibration of the model on some key Mediterranean countries of the Euro Zone, show the probabilities of contagion from Greece, Spain and Italy. Copyright International Atlantic Economic Society 2014

Keywords: Shadow exchange rate; Currency crisis; Monetary unions; Contagion; Nash equilibria; F30; F31; F41; G01 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11294-014-9471-2

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