Abstract
This chapter continues to explore the dependency links and contamination channels of the globalized new economy. Here, the focus is on integrated areas with pegged exchange rates or an irreversibly fixed exchange rate (single currency area) such as the Eurozone. This chapter also analyses the integration of the balance of payments and the key role of central banks in integrated areas. This chapter further examines why pegged exchange rates introduce new sources of vulnerability. To answer that question, we also explore a concept known as a “twin crisis” in which there is both a currency crisis and a banking crisis. We also explore two case studies: the Brexit and its consequences and China’s impact on the global financial system.
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Bouchet, M.H., Fishkin, C.A., Goguel, A. (2018). Fragility and Vulnerability of Integrated Areas. In: Managing Country Risk in an Age of Globalization. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-89752-3_7
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DOI: https://doi.org/10.1007/978-3-319-89752-3_7
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