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Fiscal transfers without moral hazard?

Roel Beetsma, Simone Cima and Jacopo Cimadomo ()

Research Bulletin, 2018, vol. 48

Abstract: We present a euro area central stabilisation scheme that is relatively free from adverse incentives (moral hazard), because transfer payments to Member States are based on changes in world trade in the various economic sectors. Indeed, these changes are largely driven by external forces and therefore not directly controlled by individual governments or countries. The transfers generated by our scheme tend to be temporary, countercyclical and larger when economies are less diversified. Finally, the scheme is quite robust to revisions in the underlying export data. JEL Classification: E32, E62, E63

Keywords: central fiscal capacity; EMU; exports; moral hazard (search for similar items in EconPapers)
Date: 2018-07
Note: 352854
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