Bulletin n. 1/2017
June 2017
  • Section A) The theory and practise of the federal states and multi-level systems of government
  • Section B) Global governance and international organizations
  • Section C) Regional integration processes
  • Section D) Federalism as a political idea
  • Canofari Paolo, Di Bartolomeo Giovanni
    Regime switches under policy uncertainty in monetary unions
    in European Journal of Political Economy , Volume 47, March 2017 ,  2017 ,  Pages 124-132
    This paper analyzes the effects of policy uncertainty on the stability of a monetary union. Focusing on peripheral countries, we study how uncertainty over the consequences of a possible exit affects regime switches. Applying game theory and a cost-benefit analysis, we model a regime switch as the endogenous result of a two-stage policy game. We find that the effects of uncertainty are not trivial. Unilateral exits are less probable, but contagion is more likely to be observed. Our results are driven by two opposite forces: a traditional conservative effect induced by policy uncertainty in a single policymaker framework, which calls for more stability, and a strategic effect, arising from the strategic interaction, which may undermine the monetary union's foundation and strengthen incentives for contagion.
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