Jump to ContentJump to Main Navigation
Show Summary Details
More options …

The Economists’ Voice

Ed. by Belke, Ansgar / Schnabl, Gunther

1 Issue per year


CiteScore 2017: 0.15

SCImago Journal Rank (SJR) 2017: 0.104
Source Normalized Impact per Paper (SNIP) 2017: 0.105

Online
ISSN
1553-3832
See all formats and pricing
More options …
Ahead of print

Issues

How to Leave the Eurozone: The Case of Finland

Tuomas Malinen / Peter Nyberg / Heikki Koskenkylä / Elina Berghäll / Ilkka Mellin / Sami Miettinen / Jukka Ala-Peijari / Stefan Törnqvist
Published Online: 2018-11-17 | DOI: https://doi.org/10.1515/ev-2018-0020

Abstract

This article provides thoughts and guidelines on how a country could exit from the Economic and Monetary Union (EMU) and its currency the euro. We take the hypothetical exit of Finland as a concrete example. Although there is a way out of the euro for Finland and other member countries, exit would not be easy, nor would its short-term costs be known beforehand with any clear margin. We find the lack of a domestic payments system and uncertainty concerning the redenomination costs to be the biggest risks associated with the cost of Finland’s exit. Still, the costs of Finland’s exit need not be very large, around 10 billion euros in the best-case scenario, but we also acknowledge a very costly scenario for the exit.

Keywords: domestic currency; euro; exchange rate; payment system

JEL Classification: E61; F45; H12

References

  • Åslund, A. 2012. “Why a Breakup of the Euro Area must be Avoided: Lessons from Previous Breakups.” Peterson Institute for International Economics Policy Brief, August 2012.Google Scholar

  • Athanassiou, P. 2009. “Withdrawal and Expulsion from the EU and EMU.” European Central Bank Legal Working Paper Series No. 10.Google Scholar

  • Bagnai, A., B. Granville, and C. A. M. Ospina. 2017. “Withdrawal of Italy from the Euro Area: Stochastic Simulations of a Structural Macroeconometric Model.” Economic Modelling 64 (August): 524–538.Google Scholar

  • Berghäll, E., H. Koskenkylä, T. Malinen, and P. Nyberg. 2017. “Euro and its costs - A reply to Dr. Oksanen.” The Economics Magazine 113 (3): 393–399.Google Scholar

  • Capital Economics. 2014. “NExit: Assessing the Economic Impact of the Netherlands Leaving the European Union.” 6 February 2014.Google Scholar

  • Céspedes, L. F. 2005. “Financial Frictions and Real Devaluations.” Central Bank of Chile Working Paper No 318.Google Scholar

  • Corsetti, G., K. Kuester, and G. Müller. 2016. “The Case for Flexible Exchange Rates in a Great Recession.” CEPR Discussion Paper DP 11432.Google Scholar

  • Dornbusch, R. 1996. “Euro Fantasies: Common Currency as Panacea.” Foreign Affairs, 75.Google Scholar

  • Einaudi, L. 2000. “The Generous Utopia of Yesterday can Become the Practical Achievement of Tomorrow: 1000 Years of Monetary Union in Europe.” National Institute Economic Review 172: 90–104.Google Scholar

  • Estrin, S., and G. Urga. 1997. “Convergence in Output in Transition Economies: Central and Eastern Europe, 1970–1995.” SSRN Working Paper No. 11072.Google Scholar

  • European Financial Market Lawyers Group. 2003. “Force Majeure Clauses and Financial Markets in EU Context.” http://www.efmlg.org/Docs/Documents/2003%20November%20EFMLG%20report%20-%20Force%20Majeure%20Clauses%20and%20Financial%20Markets%20in%20an%20EU%20context.pdf.

  • Fidrmuc, J., J. Horvath, and J. Fidrmuc. 1999. “The Stability of Monetary Unions: Lessons from the Breakup of Czechoslovakia.” Journal of Comparative Economics 27: 753–781.Google Scholar

  • FFI, Federation of Finnish Financial Services. 2008. “Maksaminen Suomessa ja Euroopassa.”Google Scholar

  • Galbraith, J. K. 2016. Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe. New Haven: Yale University Press.Google Scholar

  • Ghosh, A., J. Ostry, and M. Qureshi. 2015. “Exchange Rate Management and Crisis Susceptibility: A Reassessment.” IMF Economic Review 63 (1): 238–276.Google Scholar

  • Glynn-Jones O., and N. Pryor. 2015. “Mitigating the Risks Implications of Grexit.” Berwin, Leighton and Paisner LLP, 1.7.2015. https://www.blplaw.com/expert-legal-insights/articles/mitigating-risk-implications-grexit.

  • Gopinath, G. Ş. Kalemli-Özcan, L. Karabarbounis, and C. Villegas-Sanchez. 2017. “Capital Allocation and Productivity in South Europe.” Quarterly Journal of Economics 4 (132): 1915–1967.Google Scholar

  • Jones, C. 2016. “ECB Fears Legal Action will Rein in Scope for QE.” Financial Times, September 22. https://www.ft.com/content/8e281f7c-7f2d-11e6-bc52-0c7211ef3198.

  • Kanniainen, V., J. Ala-Peijari, E. Berghäll, M. Kantor, H. Koskenkylä, P. Koskenoja, E. Lepomäki, T. Malinen, I. Mellin, S. Miettinen, P. Nyberg, and S. Törnqvist. 2014. The Future of the EMU – The Options for Finland. Helsinki: Libera.Google Scholar

  • Kearns, J., and N. Patel. 2016. “Does the Financial Channel of Exchange Rates Offset the Trade Channel?” BIS Quarterly Review, December 2016.Google Scholar

  • King, Mervyn. 2016. The End of Alchemy: Money, Banking and the Future of the Global Economy. New York: W.W. Norton.Google Scholar

  • Kohn, D., F. Leibovici, and M. Szkup. 2017. “Financial Frictions and Export Dynamics in Large Devaluations.” FED St. Louis Working Paper No 2017-013A.Google Scholar

  • Leinonen, H. 2007. “Muovista Biteiksi – Maksutavat Murroksessa.” Euro ja Talous 4: 27–35.Google Scholar

  • Malinen, T., P. Nyberg, H. Koskenkylä, E. Berghäll, I. Mellin, S. Miettinen, J. Ala-Peijari, and S. Törnqvist. 2016. “How to Abandon the Common Currency in Exchange for a New National Currency.” SSRN Working Paper No. 2847507.Google Scholar

  • Meyer, D. 2012. “Currency Disintegration: Two Scenarios of Withdrawal.” Applied Economics Quarterly 58 (3): 171–191.Google Scholar

  • Nechio, F. 2011. “Monetary Policy: When One Size Does Not Fit All.” FRBSF Economic Letter, June 13.Google Scholar

  • Nordvig, J. 2014. “Currency Redenomination and Balance Sheet Effects.” http://jensnordvig.com/paper-on-redenomination-risk/.

  • Proctor, C. 2011. “The Euro – Fragmentation and the Financial Markets.” Capital Markets Law Journal 6 (1): 5–28.Google Scholar

  • Rose, A. K. 2007. “Checking Out: Exits From Currency Unions.” Journal of Financial Transformation. CEPR Discussion Paper 6254.Google Scholar

  • Schmitt-Grohe, S., and Uribe M. 2016. “Downward Nominal Wage Rigidity, Currency Pegs, and Involuntary Unemployment.” Journal of Political Economy 124 (5): 1466–1514.Google Scholar

  • Sinn, H-W. 2014. The Euro Trap. On Bursting Bubbles, Budgets and Beliefs. Oxford University Press: Oxford.Google Scholar

  • Stiglitz, J. E. (2016). The Euro: How a Common Currency Threatens the Future of Europe. New York: W.W. Norton & Company.Google Scholar

  • Takala, K. 2015. “Katsaus käteisen käyttöön ja virtuaalivaluuttoihin.” Bank of Finland, Payments Council, 17.4.2015.Google Scholar

  • Variant Perception. (2012). “A primer for the Euro Breakup: Default, Exit and Devaluation as the Optimal Solution.” http://albertobagnai.it/wp-content/uploads/2016/02/Tepper2012.pdf.

  • Woodford, M. 2011. “Simple Analytics of the Government Expenditure Multiplier.” American Economic Journal: Macroeconomics 3 (1): 1–35.Google Scholar

About the article

Published Online: 2018-11-17


Citation Information: The Economists’ Voice, 20180020, ISSN (Online) 1553-3832, DOI: https://doi.org/10.1515/ev-2018-0020.

Export Citation

©2018 Walter de Gruyter GmbH, Berlin/Boston.Get Permission

Comments (0)

Please log in or register to comment.
Log in