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Fiscal integration and growth stimulation in Europe

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  • DREZE, Jacques

    ()
    (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

  • DURRE, Alain

    ()
    (IESEG-School of Management (Lille Catholic University) and LEM-CNRS)

Abstract

With the current sovereign debt crisis, the incompleteness of economic integration in the Economic and Monetary Union (EMU) has become patent leading to an intense debate among academics and policy makers. Most of the debate focuses on the needs to strengthen fiscal rules and to restore fiscal imbalances through austerity measures which weigh on growth prospects. In this paper we analyse current economic developments within the euro area through the lens of general equilibrium theory. We address two issues (international sharing of macroeconomics risks and coordinated growth stimulation) which are essential to guarantee the sustainability of the EMU. More specifically, we propose mechanisms to cope with intergenerational and interregional risks while focusing on (fiscally neutral) investments meeting social needs and apt to break the vicious circle between fiscal imbalances and stagnation.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2013013.

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Date of creation: 06 May 2013
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Handle: RePEc:cor:louvco:2013013

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Keywords: pgeneral equilibrium model; risk sharing; growth stimulation; fiscal integration; EMU; indexed bonds;

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  1. Herings, P.J.J. & Polemarchakis, H.M., 1999. "Pareto Improving Price Regulation when the Asset Market is Incomplete," Discussion Paper 1999-30, Tilburg University, Center for Economic Research.
  2. Gordon, Roger H. & Varian, Hal R., 1988. "Intergenerational risk sharing," Journal of Public Economics, Elsevier, vol. 37(2), pages 185-202, November.
  3. Uhlig, Harald, 2002. "One Money, but Many Fiscal Policies in Europe: What Are the Consequences?," CEPR Discussion Papers 3296, C.E.P.R. Discussion Papers.
  4. Dreze, Jacques H. & Modigliani, Franco, 1972. "Consumption decisions under uncertainty," Journal of Economic Theory, Elsevier, vol. 5(3), pages 308-335, December.
  5. John Gilbert & Nilanjan Banik, 2010. "Socioeconomic Impacts of Cross- Border Transport Infrastructure Development in South Asia," Development Economics Working Papers 21803, East Asian Bureau of Economic Research.
  6. Maurice Obstfeld & Giovanni Peri, 1998. "Regional non-adjustment and fiscal policy," Economic Policy, CEPR & CES & MSH, vol. 13(26), pages 205-259, 04.
  7. Drudi, Francesco & Durré, Alain & Mongelli, Francesco Paolo, 2012. "The interplay of economic reforms and monetary policy: the case of the euro area," Working Paper Series 1467, European Central Bank.
  8. Wheaton, William C, 1977. "Residential Decentralization, Land Rents, and the Benefits of Urban Transportation Investment," American Economic Review, American Economic Association, vol. 67(2), pages 138-43, March.
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Citations

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Cited by:
  1. Jean J. Gabszewicz & Skerdilajda Zanaj, 2013. "(Un)stable vertical collusive agreements," CREA Discussion Paper Series 13-12, Center for Research in Economic Analysis, University of Luxembourg.
  2. Jörg Bibow, 2013. "Lost at Sea: The Euro Needs a Euro Treasury," IMK Studies 35-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  3. MAULEON, Ana & MOLIS, Elena & VANNETELBOSCH, Vincent & VERGOTE , Wouter, 2013. "Dominance invariant one-to-one matching problems," CORE Discussion Papers 2013052, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. NESTEROV, Yurii, 2013. "Universal gradient methods for convex optimization problems," CORE Discussion Papers 2013026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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