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Federal fiscal transfers in monetary unions: A NOEM approach

  • Michael Evers

    ()

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. Copyright Springer Science + Business Media, LLC 2006

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File URL: http://hdl.handle.net/10.1007/s10797-006-8949-0
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Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 13 (2006)
Issue (Month): 4 (August)
Pages: 463-488

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Handle: RePEc:kap:itaxpf:v:13:y:2006:i:4:p:463-488
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102915

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  1. Giancarlo Corsetti & Paolo Pesenti, 2001. "Welfare And Macroeconomic Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 421-445, May.
  2. Benigno, Pierpaolo, 2004. "Optimal monetary policy in a currency area," Journal of International Economics, Elsevier, vol. 63(2), pages 293-320, July.
  3. Lane, P.R. & Ganelli, G., 2002. "Dynamic General Equilibrium Analysis: The Open Economy Dimension," CEG Working Papers 20026, Trinity College Dublin, Department of Economics.
  4. Maurice Obstfeld and Kenneth Rogoff., 1999. "New Directions for Stochastic Open Economy Models," Center for International and Development Economics Research (CIDER) Working Papers C99-107, University of California at Berkeley.
  5. Gianluca Benigno & Pierpaolo Benigno, 2003. "Price Stability in Open Economies," Review of Economic Studies, Wiley Blackwell, vol. 70(4), pages 743-764, October.
  6. Lane, P, 1999. "The New Open Economy Macroeconomics: A Survey," Trinity Economics Papers 993, Trinity College Dublin, Department of Economics.
  7. Obstfeld, Maurice & Rogoff, Kenneth S., 1995. "Exchange Rate Dynamics Redux," Scholarly Articles 12491026, Harvard University Department of Economics.
  8. Xavier Sala-i-Martin & Jeffrey Sachs, 1991. "Fiscal Federalism and Optimum Currency Areas: Evidence for Europe From the United States," NBER Working Papers 3855, National Bureau of Economic Research, Inc.
  9. Kletzer, Kenneth & von Hagen, Jürgen, 2000. "Monetary Union and Fiscal Federalism," CEPR Discussion Papers 2615, C.E.P.R. Discussion Papers.
  10. Hau, Harald, 2000. "Exchange rate determination: The role of factor price rigidities and nontradeables," Journal of International Economics, Elsevier, vol. 50(2), pages 421-447, April.
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