Is it is or is it ain't my obligation? Regional debt in a fiscal federation
This paper studies the repayment of regional debt in a multiregion economy with a central authority: Who pays the obligation issued by a region? With commitment, a central government will use its taxation power to smooth distortionary taxes across regions. Absent commitment, the central government may be induced to bail out the regional government in order to smooth consumption and distortionary taxes across the regions. We characterize the conditions under which bailouts occur and their welfare implications. The gains to creating a federation are higher when the (government spending) shocks across regions are negatively correlated and volatile. We use these insights to comment on actual fiscal relations in three quite different federations: the U.S., the European Union and Argentina.
|Date of creation:||2005|
|Date of revision:|
|Note:||Published as: Cooper, Russell, Hubert Kempf and Dan Peled (2008), "Is It Is or Is It Ain't My Obligation? Regional Debt in a Fiscal Federation," International Economic Review 49 (4): 1469-1504.|
|Contact details of provider:|| Web page: http://www.dallasfed.org/|
More information through EDIRC
|Order Information:|| Email: |
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.:
- Carlos E. Zarazaga, 1993. "Hyperinflations and moral hazard in the appropriation of seigniorage," Working Papers 93-26, Federal Reserve Bank of Philadelphia.
- Juan Pablo Nicolini & Josefina Posadas & Juan Sanguinetti & Pablo Sanguinetti & Mariano Tommasi, 2002. "Decentralization, Fiscal Discipline in Sub-National Governments and the Bailout Problem: The Case of Argentina," Research Department Publications 3160, Inter-American Development Bank, Research Department.
- James M. Poterba, 1996.
"Budget Institutions and Fiscal Policy in the U.S. States,"
NBER Working Papers
5449, National Bureau of Economic Research, Inc.
- Poterba, James M, 1996. "Budget Institutions and Fiscal Policy in the U.S. States," American Economic Review, American Economic Association, vol. 86(2), pages 395-400, May.
- Jordi GalÌ & Roberto Perotti, 2003. "Fiscal policy and monetary integration in Europe," Economic Policy, CEPR;CES;MSH, vol. 18(37), pages 533-572, October.
- Russell W. Cooper & Hubert Kempf, 2002.
"Overturning Mundell: fiscal policy in a monetary union,"
311, Federal Reserve Bank of Minneapolis.
- Russell Cooper & Hubert Kempf, 2004. "Overturning Mundell: Fiscal Policy in a Monetary Union," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 371-396.
- Russell Cooper & Hubert Kempf, 2004. "Overturning Mundell : Fiscal policy in a monetary union," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00266420, HAL.
- Fabio Canova & Evi Pappa, 2006.
"Does it Cost to be Virtuous? The Macroeconomic Effects of Fiscal Constraints,"
in: NBER International Seminar on Macroeconomics 2004, pages 327-370
National Bureau of Economic Research, Inc.
- Canova, Fabio & Pappa, Evi, 2004. "Does it Cost to be Virtuous? The Macroeconomic Effect of Fiscal Constraints," CEPR Discussion Papers 4747, C.E.P.R. Discussion Papers.
- Fabio Canova & Evi Pappa, 2005. "Does it Cost to be Virtuous? The Macroeconomic Effects of Fiscal Constraints," NBER Working Papers 11065, National Bureau of Economic Research, Inc.
- Fabio Canova & Evi Pappa, 2004. "Does it cost to be virtuous? The macroeconomic effects of fiscal constraints," Economics Working Papers 926, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2004.
- Fabio Canova & Evi Pappa, 2005. "Does it cost to be virtuous? The macroeconomic effects of fiscal constraints," LSE Research Online Documents on Economics 526, London School of Economics and Political Science, LSE Library.
- Jordi Gali & Roberto Perotti, 2003.
"Fiscal Policy and Monetary Integration in Europe,"
NBER Working Papers
9773, National Bureau of Economic Research, Inc.
- Mariano Tommasi & Pablo Sanguinetti, 2003.
"Intergovernmental Transfers and Fiscal Behavior: Insurance versus Aggregate Discipline,"
60, Universidad de San Andres, Departamento de Economia, revised Aug 2003.
- Sanguinetti, Pablo & Tommasi, Mariano, 2004. "Intergovernmental transfers and fiscal behavior insurance versus aggregate discipline," Journal of International Economics, Elsevier, vol. 62(1), pages 149-170, January.
- V. V. Chari & Patrick J. Kehoe, 1998.
"On the need for fiscal constraints in a monetary union,"
589, Federal Reserve Bank of Minneapolis.
- Chari, V.V. & Kehoe, Patrick J., 2007. "On the need for fiscal constraints in a monetary union," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2399-2408, November.
- Sebastian M. Saiegh & Mariano Tommasi, 1999. "Why is Argentina’s Fiscal Federalism so Inefficient? Entering the Labyrinth," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 169-209, May.
- Russell W. Cooper & Hubert Kempf, 2001. "Dollarization and the conquest of hyperinflation in divided societies," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 3-12.
- Alfredo Cuevas, 2003. "Reforming Intergovernmental Fiscal Relations in Argentina," IMF Working Papers 03/90, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:fip:feddwp:05-07. 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: (Amy Chapman)
If references are entirely missing, you can add them using this form.