Thursday, November 10, 2011

breaking up is hard to do

i listened to tuesday's planet money podcast this morning in which they consider how greece might exit the euro by looking at what happened with the breakup of the austro-hungarian monetary union. apparently, it didn't go so well.

but that made me wonder why only look at that example for a common currency exit scenario. there are a ton of other examples of countries leaving a common currency. the ones that come to my mind are:

(1) mali leaving the west african CFA in 1961 (mali rejoined the CFA zone in 1984).
(2) mauritania leaving the west african CFA in 1973.
(3) the exit of 14 former soviet republics from the ruble zone between 1992 and 1995.
(4) the split of the czechoslovak koruna into the czech koruna and slovak koruna in 1993.

then there's this whole complicated mess that i haven't been able to make sense of, but which probably involves the comings and goings of various countries from the various common currency regimes of the british empire.

the bottom line is that stuff like this has happened before several times over. aside from kazakhstan's exit from the ruble zone (a story might not be the best example for what would happen to greece because kazakhstan's exit in 1993 was in the midst of the economic turmoil that came with the collapse of a superpower), i don't know the details of what happened in each of those cases. but presumably some went better than others. (stergios skaperdas mentions that the czech-slovak currency breakup, like the rest of their breakup, went fairly well). maybe someone could look into those other cases to see what factors made things better or worse.

just something to think about if you're going for the wolfson economics prize (pdf).