One scheme fits all: a central fiscal capacity for the EMU targeting eurozone, national and regional shocks

Roel Beetsma, Jacopo Cimadomo and Josha van Spronsen

No 2666, Working Paper Series from European Central Bank

Abstract: This paper proposes a central fiscal capacity for the euro area that generates transfers in response to eurozone, country, and region-specific shocks. The main novelty of this fiscal capacity is that it allows a joint response to these three types of shocks within a single scheme. Based on NUTS3 regional data over the last two decades and regional fiscal multiplier estimates, our analysis shows that - with a limited risk of moral hazard - substantial stabilisation could have been achieved in response to the eurozone and regional shocks, while country-specific shocks were on average less severe and therefore needed less stabilisation. JEL Classification: C38, E32, E62, E63

Keywords: Bayesian inference; Central fiscal capacity; macroeconomic stabilisation; multilevel factor model (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-eec, nep-mac, nep-mon and nep-ure
Note: 352854
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: One scheme fits all: A central fiscal capacity for the EMU targeting eurozone, national and regional shocks (2024)
Working Paper: One Scheme Fits All: A Central Fiscal Capacity for the EMU Targeting Eurozone, National and Regional Shocks (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20222666

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