 Macroeconomic stabilisation properties of a euro area unemployment insurance schemeChristoph Kaufmann, Maria Grazia Attinasi and Sebastian Hauptmeier Journal of Economic Dynamics and Control, 2023, vol. 153, issue C Abstract: In this paper we use a medium-scale DSGE model to quantitatively assess the macroeconomic stabilisation properties of a supranational unemployment insurance scheme. The model is calibrated to the euro area’s core and periphery and features a rich fiscal sector, sovereign risk premia and labour market frictions. Adopting both simple policy rules and optimal policies for the centralised insurance scheme, our simulations point to enhanced business cycle synchronisation and inter-regional consumption smoothing. The results suggest a sizeable reduction in the volatility of macroeconomic aggregates at the region-level, while the cross-regional correlation of unemployment and inflation increases significantly, compared to the decentralised setting. The higher degree of inter-regional risk-sharing comes at the cost of sizable fiscal transfers. Limiting such transfers via claw-back mechanisms reduces the degree of stabilisation across countries. Keywords: Monetary union; Fiscal union; Unemployment insurance; Optimal policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:153:y:2023:i:c:s0165188923001045 DOI: 10.1016/j.jedc.2023.104698 Access Statistics for this article Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok More articles in Journal of Economic Dynamics and Control from Elsevier |
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