Abstract
We examine the real option implicit in countries' decisions on whether to join a monetary union when future benefits of this move are uncertain. Our theoretical model is calibrated for the current Euro-12 area and EU-15 outs, proxying policymakers' inflation preferences with unemployment rates, debt-to-GDP and potential-to-actual-GDP ratios. The Euro-12 area is generally ready or close to wanting to expand, whereas the EU-15 outs are unready to make that move at present and have widely varying probabilities of wanting to do so in the future, depending on the measure used.
Original language | English |
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Pages (from-to) | 105-115 |
Number of pages | 11 |
Journal | Scottish Journal of Political Economy |
Volume | 54 |
Issue number | 1 |
Early online date | 24 Jan 2007 |
DOIs | |
Publication status | Published - Feb 2007 |