The conventional narrative for the European debt crisis stresses three factors, namely, bad policies and profligacy in the afflicted countries –mostly southern ones, flaws in the EMU design, and wise policies in the northern frugal countries. This paper argues that the root causes of the...

Based on a theoretical monetary exchange-rate model in continuous time this paper establishes a sequential estimation framework which is capable of indicating central bank intervention in the run-up to a currency union. Using daily pre-EMU exchange-rate data for the countries of the current euro...