In one of the last CGR Working Papers Professor Brigitte Granville and Dominik Nagly analyse the incentives structure of the public support to the Economic and Monetary Union.
“The Brender and Drazen (2009) model is applied to the predicament of the less competitive countries within the Economic and Monetary Union (EMU). The application of a political economy model indicates the extent of the difficulty of maintaining public support for the monetary union within the existing fiscal policy framework. While we do not underestimate the costs of an EMU breakup, the paper provides some preliminary estimates and highlights the importance of a fresh approach to modelling the costs of exit from the monetary union across time frames.“
The full paper can be read here, you can also read the comment piece based on the paper’s finding on the CGR blog.