In contrast to Robert Mundell‘s Optimum Currency Area theory and his recommendation of forming monetary union, the economic fundamentals of Euro area member countries have not harmonized. The opposite holds: the Euro core countries – most of all Germany, but also the Netherlands and Finland...

We provide an economic valuation of the riskiness of risk models. We estimate the impact of model risks (estimation and specification) on VaR estimates. We find that integrating the model risk into the VaR computations implies a substantial correction, of order of 20-40% of VaR levels in...