Theory and practice of contagion in monetary unions. Domino effects in EU Mediterranean countries: The case of Greece, Italy and Spain
Paolo Canofari (),
Giovanni Di Bartolomeo () and
Giovanni Piersanti ()
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This paper analyzes strategic interactions and contagion effects in countries joined to a monetary union. Using game theory and a 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 to Spain and Italy.
Keywords: Shadow exchange rate; currency crisis; monetary unions; contagion; Nash equilibria (search for similar items in EconPapers)
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Persistent link: http://EconPapers.repec.org/RePEc:ter:wpaper:0098
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