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Which fiscal capacity for the euro-area: Different cyclical transfer schemes in comparison

Sebastian Dullien ()

No 1502, Competence Centre on Money, Trade, Finance and Development from Hochschule fuer Technik und Wirtschaft, Berlin

Abstract: The paper compares different recently discussed proposals for a „fiscal capacity“ for the EuropeanMonetary Union with respect of their ability to stabilize the EMU business cycle and hence tocontribute to a better policy mix in Europe. The term fiscal capacity has sprung up in a number ofofficial documents over the past years, among others the EU Commission’s roadmap for a morecohesive EMU. One interpretation of the „fiscal capacity“ is the introduction of cross-border fiscaltransfers to stabilize the business cycle in EMU member countries. The paper takes a look at recentproposals for such transfer systems. Here, especially, Notre Europe’s Cyclical Shock Insurance (CSI)Scheme (Enderlein et al. 2013, 2013a), Dullien’s (2014) European Basic Unemployment Insurance andCEPS‘ (2014) Catastrophic Unemployment Insurance are compared. It is argued that the CSI carriesthe danger to actually exacerbate cyclical variations in the euro-area. Among the basic and thecatastrophic unemployment insurance, the advantage of the catastrophic unemployment insuranceis that it is far easier to implement and to administer while the basic unemployment insurance hasthe advantage that it offers the widest and strongest stabilization impact among the proposedschemes.

Keywords: EMU; fiscal capacity; shock absorber; European unemployment insurance (search for similar items in EconPapers)
JEL-codes: E63 F15 J65 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2015-12
New Economics Papers: this item is included in nep-eec and nep-ias
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Citations: View citations in EconPapers (1) Track citations by RSS feed

Published in Berlin Working Papers on Money, Finance, Trade and Development, December 2015

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Persistent link: https://EconPapers.repec.org/RePEc:mtf:wpaper:1502

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