A Note on Time Inconsistency and Endogenous Exits from a Currency Union

This paper investigates the effects of members’ exits from a currency union on credibility common currency. In our model, inflation rate is determined by majority voting among N member countries that are heterogeneous with respect to their output shocks. Once an has been selected, each decides whether remain in or not. If exit, it pay fixed social cost and individually chooses its Unlike previous research this topic, we focus possibility achieving optimal outcome, which generates no bias, when more than one expected leave union. We show outcome can only be achieved if members