Theory predicts that a fixed exchange rate regime will be abandoned after a sizable economic shock as currency devaluation could stimulate exports and output. However, devaluation is risky as the new level of the exchange rate and the rate of inflation cannot be predicted. We show that this...

We use unique survey data from Bulgaria to investigate the effect of recent bailouts on the perceived benefits of joining the European Monetary Union (EMU). The data show that the EMU is perceived as an insurance mechanism where member states can receive financial assistance in times of crisis....

Theory predicts that a fixed exchange rate regime will be abandoned after a sizable economic shock as currency devaluation could stimulate exports and output. However, devaluation is risky as the new level of the exchange rate and the rate of inflation cannot be predicted. We show that this...