On deficits and symmetries in a fiscal capacity

There is a growing debate about complementing the European Monetary Union by a more comprehensive fiscal union. Against this background, this paper emphasizes that there is a trade-off in designing a system of fiscal tra
There is a growing debate about complementing the European Monetary Union by a more comprehensive fiscal union. Against this background, this paper emphasizes that there is a trade-off in designing a system of fiscal transfers ("fiscal capacity") in a union between members of different size. A system cannot guarantee symmetric treatment of members and simultaneously ensure a balanced budget. We compute hypothetical transfers for the Eurozone members from 2001 to 2012 to illustrate this trade-off. Interestingly, a symmetric system that treats shocks in small and large countries symmetrically would have produced large budgetary surpluses in 2009, the worst year of the financial crisis.
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Metadaten
Author:Shafik Hebous, Alfons J. Weichenrieder
URN:urn:nbn:de:hebis:30:3-385870
URL:http://ssrn.com/abstract=2637776
DOI:http://dx.doi.org/10.2139/ssrn.2637776
Parent Title (German):SAFE working paper series ; No. 112
Series (Serial Number):SAFE working paper series (112)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Date of Publication (online):2015/07/30
Date of first Publication:2015/07/30
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2015/12/01
Tag:asymmetric shocks; federal transfers; fiscal union; optimum currency area
Issue:July 2015
Pagenumber:14
First Page:1
Last Page:14
HeBIS PPN:368512592
Institutes:Wirtschaftswissenschaften
House of Finance (HoF)
Center for Financial Studies (CFS)
Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:H50 General
H60 General
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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