Institutionalizing eurozone exit: A modified NEWNEY approach

Steffen Huck and Justin Mattias Valasek

Discussion Papers, Research Unit: Economics of Change from WZB Berlin Social Science Center

Abstract: In this note, we argue that the Eurozone needs an institutional exit mechanism to enhance Eurozone stability, and propose modifications to the Dobbs' NEWNEY mechanism, the only mechanism that satisfies the twin properties of eliminating incentives for intra-Eurozone capital flight and maintaining Eurozone price stability. Our modifications eliminate moral hazard, allow for a fair distribution of costs (between and within countries) and are also appropriate for the exit of a fiscally strong country.

Keywords: Supranational Unions; Efficiency; Public Goods; Redistribution; Federalism; Legislative Bargaining (search for similar items in EconPapers)
JEL-codes: D71 H77 H87 (search for similar items in EconPapers)
Date: 2012
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https://www.econstor.eu/bitstream/10419/68145/1/733995055.pdf (application/pdf)

Related works:
Working Paper: Institutionalizing Eurozone Exit: A Modified NEWNEY Approach (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wzbeoc:spii2012304

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