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

No 98, CIMEO Working Paper Series from Centre for Investigation and Modelling of Experimental Observations (CIMEO)

Abstract: 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)
Date: 2013-01
New Economics Papers: this item is included in nep-cmp, nep-eec, nep-mon and nep-opm
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ter:wpaper:0098

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