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A euro area macroeconomic stabilisation function: assessing options in view of their redistribution and stabilisation properties

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  • Koester, Gerrit
  • Sondermann, David

Abstract

A macroeconomic stabilisation function for the euro area - as envisaged in the Five Presidents’ Report - plays a central role in the debate on deepening Economic and Monetary Union (EMU). We evaluate a broad range of options, their impact on economic growth, macroeconomic stabilisation and synchronisation of the euro area business cycle, and review how they could be designed so they do not undermine incentives for welfare-enhancing national economic policies. A common macroeconomic stabilisation function, e.g. in the form of a European Unemployment Insurance (EUI), could in theory help stabilise the business cycle in the euro area, especially in some participating Member States. Yet, simulating the effects of such a function for 2002-2014 suggests that its stabilisation properties would have been relatively limited. At the same time, design options with meaningful safeguards and relatively low financing requirements would have been most efficient when comparing the degree of stabilisation with the size of the funds distributed among countries. Finally, we discuss some design elements of a scheme whose aim is to support the transition process towards more resilient economic structures in the euro area as envisaged in the Five Presidents’ Report. JEL Classification: J65, H53, F55

Suggested Citation

  • Koester, Gerrit & Sondermann, David, 2018. "A euro area macroeconomic stabilisation function: assessing options in view of their redistribution and stabilisation properties," Occasional Paper Series 216, European Central Bank.
  • Handle: RePEc:ecb:ecbops:2018216
    Note: 3015628
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    Cited by:

    1. Mathias Dolls, 2019. "An Unemployment Re-Insurance Scheme for the Eurozone? Stabilizing and Redistributive Effects," EconPol Policy Reports 10, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    2. Beetsma, Roel & Burgoon, Brian & De Ruijter, Anniek & Nicoli, Francesco & Vandenbroucke, Frank, 2020. "What kind of EU fiscal capacity? Evidence from a randomized survey experiment in five European countries in times of corona," CEPR Discussion Papers 15094, C.E.P.R. Discussion Papers.
    3. Esther Gordo & Ivan Kataryniuk, 2019. "Towards a more resilient euro area," Economics and Business Letters, Oviedo University Press, vol. 8(2), pages 106-114.
    4. Kaufmann, Christoph & Attinasi, Maria Grazia & Hauptmeier, Sebastian, 2020. "Macroeconomic stabilisation properties of a euro area unemployment insurance scheme," Working Paper Series 2428, European Central Bank.

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    More about this item

    Keywords

    economic union; EMU; macroeconomic stabilisation; unemployment insurance;
    All these keywords.

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements

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