Political Economy of Fiscal Unions
I formulate a political-economy model of a fiscal union where the threat of secession imposes a limit on fiscal redistribution between regions. I argue that the trade-off between implementing the region’s preferred fiscal policy and benefiting from inter-regional risk sharing depends on the nature of economic shocks. Specifically both correlation of shocks across regions and their persistence over time are important. The gains from inter-regional risk sharing are potentially large when shocks are negatively correlated and temporary. In contrast, unions with negatively correlated permanent shocks are likely to prove politically unviable.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fidrmuc, J. & Horváth, J., 1998.
"Stability of Monetary Unions : Lessons from the Break-Up of Czechoslovakia,"
1998-74, Tilburg University, Center for Economic Research.
- Fidrmuc, Jan & Horvath, Julius & Fidrmuc, Jarko, 1999. "Stability of Monetary Unions: Lessons from the Break-up of Czechoslovakia," Transition Economics Series 10, Institute for Advanced Studies.
- Fidrmuc, Jan & Horvath, Julius & Fidrmuc, Jarko, 1999. "Stability of monetary unions: Lessons from the break-up of Czechoslovakia," ZEI Working Papers B 17-1999, ZEI - Center for European Integration Studies, University of Bonn.
- Becker, Sascha O. & Hoffmann, Mathias, 2006.
"Intra- and international risk-sharing in the short run and the long run,"
European Economic Review,
Elsevier, vol. 50(3), pages 777-806, April.
- Sascha O. Becker & Mathias Hoffmann, 2003. "Intra-and International Risk-Sharing in the Short Run and the Long Run," CESifo Working Paper Series 1111, CESifo Group Munich.
- Michel Le Breton & Shlomo Weber, 2003. "The Art of Making Everybody Happy: How to Prevent a Secession," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 4.
- Ralf Hepp & JÃ¼rgen von Hagen, 2010.
"Interstate Risk Sharing in Germany: 1970-2006,"
Fordham Economics Discussion Paper Series
dp2010-04, Fordham University, Department of Economics.
- Hepp, Ralf & von Hagen, Jürgen, 2011. "Interstate Risk Sharing in Germany:1970-2006," CEPR Discussion Papers 8593, C.E.P.R. Discussion Papers.
- Ralf Hepp & Juergen von Hagen, 2010. "Interstate Risk Sharing in Germany: 1970-2006," Working papers 2010-13, University of Connecticut, Department of Economics.
- Hepp, Ralf & von Hagen, Jürgen, 2010. "Interstate risk sharing in Germany: 1970-2006," ZEI Working Papers B 03-2010, ZEI - Center for European Integration Studies, University of Bonn.
- Fidrmuc, Jan, 2000.
"Political support for reforms: Economics of voting in transition countries,"
European Economic Review,
Elsevier, vol. 44(8), pages 1491-1513, August.
- Fidrmuc, J., 1998. "Political Support for Reforms : Economics of Voting in Transition Countries," Discussion Paper 1998-98, Tilburg University, Center for Economic Research.
- Kessler, Anke & Luelfesmann, Christoph & Myers, Gordon M, 2009. "The Architecture of Federations: Constitutions, Bargaining, and Moral Hazard," CEPR Discussion Papers 7244, C.E.P.R. Discussion Papers.
- Alesina, Alberto & Perotti, Roberto, 1998.
"Economic Risk and Political Risk in Fiscal Unions,"
Royal Economic Society, vol. 108(449), pages 989-1008, July.
- repec:dgr:kubcen:199874 is not listed on IDEAS
- Le Breton, Michel & Weber, Shlomo, 2003. "The Art of Making Everybody Happy : How to Prevent a Secession," IDEI Working Papers 164, Institut d'Économie Industrielle (IDEI), Toulouse.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4344. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If references are entirely missing, you can add them using this form.