Fiscal Federalism in a Monetary Union: The No-Cooperation Pitfall

Hubert Kempf ()

Open Economies Review, 2021, vol. 32, issue 1, No 4, 109-151

Abstract: Abstract The relative merits in a monetary union of a fiscal federalism scheme and intergovernmental fiscal cooperation without a federal authority are assessed using a standard macroeconomic model commonly used for policy analysis. We show that it is impossible to conclude that one solution is always preferable to the other. The benefits from an extra instrument and a policymaker with union-wide objectives may not compensate the adding of a non-cooperative player to the policy game. This result is sustained when an active monetary policy is introduced in the model or when shocks affect the functioning of the economy. The welfare ranking of these two options depends on the cross-border spillover effects, the objectives of policymakers and the variances of shocks.

Keywords: Monetary union; Fiscal federalism; Cooperation; Policymix (search for similar items in EconPapers)
JEL-codes: E58 E62 F45 H76 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11079-019-09571-5 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Fiscal Federalism in a Monetary Union: The Cooperation Pitfall (2017)
Working Paper: Fiscal federalism in a monetary union: the cooperation pitfall (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:openec:v:32:y:2021:i:1:d:10.1007_s11079-019-09571-5

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

DOI: 10.1007/s11079-019-09571-5

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().