WP 2017/02: Withdrawal of Italy from the Eurozone: Stochastic Simulations of a Structural Macroeconometric Model

Alberto Bagnai Brigitte Granville Christian A. Mongeau Ospina 23 April 2017

This paper assesses the impact on the Italian economy of withdrawal of Italy from the Eurozone, by means of the stochastic simulation of a macroeconometric model. The model considers the contractionary effects of devaluation, the evolution of sovereign debt spread and the development of bilateral economic relations between Italy and its major trade partners. The simulation results are consistent with the findings of recent applied research: the Italian economy would follow the V-shaped pattern observed in most currency crises. After an initial period of stress, it would recover and resume growth at a reasonable pace.

Authors
Alberto Bagnai Università degli Studi "Gabriele d'Annunzio" di Chieti e Pescara
Brigitte Granville Queen Mary, Università di Londra
Christian A. Mongeau Ospina FAO
Keywords
European economic and monetary union, ECB, balance of payment crisis, Target2, Euro
JEL Codes
E11, E12, E42, E58, F32, F33, F34, F36, N24
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