Federal fiscal transfers in monetary unions: A NOEM approach |
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Authors: | Michael P Evers |
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Institution: | (1) Center for European Integration Studies, Bonn Graduate School of Economics, Bonn University, ZEI b, Walter-Flex-Str.3, D-53113 Bonn, Germany |
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Abstract: | In the debate over EMU, a widely accepted view is that a federal fiscal mechanism is needed for the participating states to
cope with asymmetric shocks. In this paper, we explore the properties of federal fiscal transfer schemes with regard to their
capability to stabilize national consumption, production and employment. We consider direct transfers among private sectors
and indirect transfers among national fiscal authorities. We show that federal fiscal arrangements can provide perfect insurance.
Our analysis builds on the New Open Economy Macroeconomics framework which allows us to portray the transmission of shocks
and the properties of transfers in detail.
JEL Code E42 · E63 · F33 · F42 |
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Keywords: | Monetary union Asymmetric productivity and demand shocks Regional economic stabilization Federal fiscal arrangements |
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