Fiscal Risk Sharing and Resilience to Shocks: Lessons for the euro area from the US

Cinzia Alcidi () and Gilles Thirion

CEPS Papers from Centre for European Policy Studies

Abstract: On May 31st, the European Commission issued a reflection paper on the deepening of the Economic and Monetary Union calling for a far-reaching debate on reforms to the economic governance architecture of the euro area. The Commission�s document also states that a fiscal stabilisation function for the euro area could be envisaged in the longer run (2020-25) in addition to the deepening of private risk-sharing mechanisms. The present paper offers a timely contribution to the important debate on the design of a possible fiscal stabilisation function for the euro area by assessing the stabilising effects and the nature of the US federal tax-transfer system to shocks. We question the mainstream argument for a euro area �fiscal capacity�, which revolves around the need to �dampen the effects of asymmetric shocks�, and argue that there are important lessons to be derived from US federal fiscal risk-sharing institutions, but that they are not what policymakers typically envisage.

Pages: 32 pages
Date: 2017-05
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eps:cepswp:12595

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