Exit strategies, capital flight and speculative attacks: Europe's version of the trilemma

Andreas Steiner, Sven Steinkamp () and Frank Westermann

European Journal of Political Economy, 2019, vol. 59, issue C, 83-96

Abstract: In the winter 2011/12, a wave of internal capital flight prompted the ECB to abandon its exit strategy and announce an unprecedented monetary expansion. We analyze this episode in several dimensions: (i) we provide an event-study analysis, covering key variables from national central banks' balance sheets, (ii) we rationalize the empirical patterns in a formal discussion of the constraints in a monetary union and (iii) we analyze different indicators of redenomination risk in the euro area. Finally, we argue that the euro area entails an inherent policy trilemma that makes it prone to speculative attacks.

Keywords: Currency union; Policy trilemma; Redenomination risk; Speculative attack; TARGET2 (search for similar items in EconPapers)
JEL-codes: E42 F36 F41 F45 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Exit Strategies, Capital Flight and Speculative Attacks: Europe's Version of the Trilemma (2017)
Working Paper: Exit Strategies, Capital Flight and Speculative Attacks: Europe's Version of the Trilemma (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:59:y:2019:i:c:p:83-96

DOI: 10.1016/j.ejpoleco.2019.02.003

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