Date of Award
Honors Thesis (Open Access)
Colby College. Economics Dept.
In the face of the growing importance of alternative monetary arrangements throughout the world, the economics literature contains contradictory explanations for the impact of currency union dissolution. Some argue that dissolving a union removes limitations to growth, while others contend that the ensuing uncertainty drives weaker macroeconomic performance. In this paper, I present empirical analysis of the macroeconomic effect of dissolving currency unions. I utilize a narrative approach to address asymmetries in the underlying motivations for different dissolutions, and find that the absence of economic concerns driving dissolution leads to improved growth in the post dissolution period. Further, evidence for weaker growth following union dissolution events is driven by concerns of reverse causality. These results indicate that the type of dissolution, as classified by motivation, matters in understanding the potential impact of that dissolution, and that different theoretical explanations prevail depending on the nature of the currency union dissolution.
currency, dissolution, international economics
Recommended CitationJosefsson, Marcus, "The Macroeconomic Effect of Currency Union Dissolution: Evidence from the Narrative" (2013). Honors Theses. Paper 689.
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