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Optimal sequencing to reform the European Economic and Monetary Union: a roadmap

  • In this paper, we examine the political gridlock in reforming the Economic and Monetary Union. We utilize a two–stage game with imperfect information in order to study the optimal sequencing. The main results are: first, optimal sequencing requires for incompliant Member States a default option in stage–two, which in principle is related to the today's fiscal architecture (EMU-I). Second, we show that compliant countries prefer a reform equilibrium today if and only if they have a free choice about the preferred fiscal architecture at the end — either EMU-II with binding European coordination or EMU-I related to Maastricht. Noteworthy, our sequencing approach works for any design of the EMU-II architecture.

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Author of HS ReutlingenHerzog, Bodo
Erschienen in:Quantiative finance and economics
Publisher:AIMS Press
Place of publication:Springfield
Document Type:Journal article
Publication year:2021
Tag:EMU; Maastricht; fiscal governance; reforming; sequencing
Page Number:14
First Page:311
Last Page:324
DDC classes:330 Wirtschaft
Open access?:Ja
Licence (German):License Logo  Creative Commons - CC BY - Namensnennung 4.0 International