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Stabilizing Macroeconomic Fluctuations In The Emu

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  • Aarle, Bas Van

Abstract

Macroeconomic performance in the Economic and Monetary union (EMU) will be impaired if national fiscal policy flexibility and monetary flexibility of the ECB is limited, goods markets adjust sluggishly, labor mobility is low, and automatic stabilization from federal taxes and government spending is low. This paper analyzes the stabilization of output fluctuations induced by symmetric and asymmetric macroeconomic shocks in the EMU. It is shown how national fiscal flexibility and flexibility of the monetary policy of the ECB can stabilize fluctuations of the average EU business cycle that are generated by symmetric shocks. Furthermore, it is demonstrated how, under EMU, national fiscal flexibility and a system of fiscal transfers are able to stabilize differences in national business cycles that are generated by asymmetric shocks.

Suggested Citation

  • Aarle, Bas Van, 2001. "Stabilizing Macroeconomic Fluctuations In The Emu," Macroeconomic Dynamics, Cambridge University Press, vol. 5(1), pages 56-80, February.
    • Handle: RePEc:cup:macdyn:v:5:y:2001:i:01:p:56-80_01
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    Cited by:

    1. Amélie BARBIER-GAUCHARD, 2020. "Blueprint for the European Fiscal Union: State of knowledge and Challenges," Working Papers of BETA 2020-39, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    2. BARBIER-GAUCHARD Amélie, 2005. "Fiscal federalism, discipline and selection adverse in the EU : Lessons from a theoretical model," Economics Bulletin, AccessEcon, vol. 28(7), pages 1.
    3. repec:ebl:ecbull:v:5:y:2005:i:11:p:1-8 is not listed on IDEAS

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