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

European Economic Review, 2024, vol. 165, issue C

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 weaker and therefore needed less stabilisation.

Keywords: Central fiscal capacity; Euro area; Macroeconomic stabilisation; Multilevel factor model; Bayesian inference (search for similar items in EconPapers)
JEL-codes: C38 E32 E62 E63 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: One Scheme Fits All: A Central Fiscal Capacity for the EMU Targeting Eurozone, National and Regional Shocks (2022)
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:eee:eecrev:v:165:y:2024:i:c:s0014292124000503

DOI: 10.1016/j.euroecorev.2024.104721

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