Macroeconomic stabilization with a common currency: Does European Monetary Unification create a need for fiscal insurance of federalism?
The implications of monetary unification for fiscal policies are discussed. The roles of nominal exchange rate flexibility in the presence of asymmetric national shocks and nominal price rigidities as an automatic stabilizer and source of disturbances to real economic performance are reviewed. Two main themes are considered. The first is whether a system of fiscal insurance across member states qualitatively replicates the effects of autonomous monetary policy instruments when exchange rates are permanently fixed. It is argued that while fiscal insurance schemes increase the instruments available to fiscal authorities to influence resource allocation, they do not augment existing fiscal instruments in a manner that replicates monetary policy under long-run monetary neutrality in an overlapping generations economy. Restrictions imposed on national fiscal instruments as a condition of monetary unification may give rise to a need for fiscal insurance to replace their role as stabilizers. The second theme addresses whether political unification is a necessary logical conclusion of the usefulness of fiscal insurance scheme. The argument that sustainable insurance arrangements can be devised without foregoing national sovereignty over fiscal policymaking is discussed.
|Date of creation:||1997|
|Contact details of provider:|| Postal: Walter-Flex-Straße 3, D - 53113 Bonn|
Web page: http://www.zei.de/
More information through EDIRC
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.:
- von Hagen, Jurgen & Hammond, George W, 1998.
"Regional Insurance against Asymmetric Shocks: An Empirical Study for the European Community,"
The Manchester School of Economic & Social Studies,
University of Manchester, vol. 66(3), pages 331-353, June.
- Hammond, George & von Hagen, Jürgen, 1995. "Regional Insurance Against Asymmetric Shocks. An Empirical Study for the European Community," CEPR Discussion Papers 1170, C.E.P.R. Discussion Papers.
- Buiter, Willem H. & Kletzer, Kenneth M., 1991. "The welfare economics of cooperative and noncooperative fiscal policy," Journal of Economic Dynamics and Control, Elsevier, vol. 15(1), pages 215-244.
- Buiter, W.H. & Kletzer, K.M., 1990. "The Welfare Economics Of Cooperative And Noncooperative Fiscal Policy," Papers 612, Yale - Economic Growth Center.
- Willem H. Buiter & Kenneth M. Kletzer, 1990. "The Welfare Economics of Cooperative and Noncooperative Fiscal Policy," NBER Working Papers 3329, National Bureau of Economic Research, Inc.
- Buiter, Willem H. & Kletzer, Kenneth, 1990. "The Welfare Economics of Cooperative and Uncooperative Fiscal Policy," CEPR Discussion Papers 420, C.E.P.R. Discussion Papers.
- Jacques Mélitz, 1995. "A suggested reformulation of the theory of optimal currency areas," Open Economies Review, Springer, vol. 6(3), pages 281-298, July.
- Melitz, Jacques, 1991. "A Suggested Reformulation of the Theory of Optimal Currency Areas," CEPR Discussion Papers 590, C.E.P.R. Discussion Papers.
- Brian D. Wright & Kenneth M. Kletzer, 2000. "Sovereign Debt as Intertemporal Barter," American Economic Review, American Economic Association, vol. 90(3), pages 621-639, June.
- Kenneth M. Kletzer and Brian D. Wright., 1998. "Sovereign Debt as Intertemporal Barter," Center for International and Development Economics Research (CIDER) Working Papers C98-100, University of California at Berkeley.
- Kenneth M. Kletzer & Brian D. Wright, 2000. "Sovereign Debt as Intertemporal Barter," International Finance 0003004, EconWPA.
- Kletzer, Kenneth M. & Wright, Brian D., 1998. "Sovereign Debt as Intertemporal Barter," Center for International and Development Economics Research, Working Paper Series qt4qg3c42v, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
- Canzoneri, Matthew B. & Diba, Behzad T., 1991. "Fiscal deficits, financial integration, and a central bank for Europe," Journal of the Japanese and International Economies, Elsevier, vol. 5(4), pages 381-403, December.
- Neumeyer, Pablo Andres, 1998. "Currencies and the Allocation of Risk: The Welfare Effects of a Monetary Union," American Economic Review, American Economic Association, vol. 88(1), pages 246-259, March.
- Neumeyer, P.A., 1995. "Currencies and the Allocation of Risk: The Welfare Effect of a Monetary Union," DELTA Working Papers 95-27, DELTA (Ecole normale supérieure).
- Cohen, Daniel & Wyplosz, Charles, 1989. "The European Monetary Union: An Agnostic Evaluation," CEPR Discussion Papers 306, C.E.P.R. Discussion Papers.
- De Grauwe, Paul & Vanhaverbeke, Wim, 1991. "Is Europe an Optimum Currency Area? Evidence from Regional Data," CEPR Discussion Papers 555, C.E.P.R. Discussion Papers.
- Randall W. Eberts & Joe A. Stone, 1992. "Wage and Employment Adjustment in Local Labor Markets," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wea, 06. Full references (including those not matched with items on IDEAS)