IDEAS home Printed from https://ideas.repec.org/a/gde/journl/gde_v63_n3-4_p289-328.html
   My bibliography  Save this article

The Political Economy of Fiscal and Monetary Unions

Author

Listed:
  • Federico Etro

    (UCSC, Milan)

Abstract

I study the political economy of fiscal unions, where the provision of public goods with spillovers across heterogeneous countries is coordinated, and of monetary unions, where monetary policy is delegated to a supranational authority by countries subject to different shocks. The focus is on the impact of institutional organizations on the size and scope of unions. I provide new results of comparative politics on alternative hierarchies between national and supranational governments choosing on public spending and redistribution, strategic delegation of policymakers under representative democracy and on the role of macroeconomic interdependence in monetary unions.

Suggested Citation

  • Federico Etro, 2004. "The Political Economy of Fiscal and Monetary Unions," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(3-4), pages 289-328, December.
    • Handle: RePEc:gde:journl:gde_v63_n3-4_p289-328
    as

    Download full text from publisher

    File URL: ftp://ftp.gde.unibocconi.it/gde_articles/2004/GDE_V63_N3-4_P289-328.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(4), pages 1169-1189.
    2. Ben Lockwood, 2002. "Distributive Politics and the Costs of Centralization," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(2), pages 313-337.
    3. Torsten Persson & Gerard Roland & Guido Tabellini, 2000. "Comparative Politics and Public Finance," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1121-1161, December.
    4. Xavier Debrun & Paul Masson & Catherine Pattillo, 2003. "West African Currency Unions: Rationale and Sustainability," CESifo Economic Studies, CESifo Group, vol. 49(3), pages 381-413.
    5. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    6. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2005. "International Unions," American Economic Review, American Economic Association, vol. 95(3), pages 602-615, June.
    7. Burbidge, John B. & James A. DePater & Gordon M. Meyers & Abhijit Sengupta, 1997. "A Coalition-Formation Approach to Equilibrium Federations and Trading Blocs," American Economic Review, American Economic Association, vol. 87(5), pages 940-956, December.
    8. Guido Tabellini, 2003. "Principles of Policymaking in the European Union: An Economic Perspective," CESifo Economic Studies, CESifo Group, vol. 49(1), pages 75-102.
    9. Robert Dur & Hein Roelfsema, 2005. "Why does centralisation fail to internalise policy externalities?," Public Choice, Springer, vol. 122(3), pages 395-416, March.
    10. Roberts, Kevin, 2015. "Dynamic voting in clubs," Research in Economics, Elsevier, vol. 69(3), pages 320-335.
    11. Buti, M. & Eijffinger, S.C.W. & Franco, D., 2003. "Revisiting the Stability and Growth Pact : Grand Design or Internal Adjustment?," Other publications TiSEM 2e5a01d9-9a1f-492d-995f-a, Tilburg University, School of Economics and Management.
    12. Sibert, Anne & Sutherland, Alan, 2000. "Monetary union and labor market reform," Journal of International Economics, Elsevier, vol. 51(2), pages 421-435, August.
    13. Daniel Brou & Michele Ruta, 2004. "A Positive Explanation of EU Enlargement," Economics Working Papers ECO2004/30, European University Institute.
    14. Federico Etro, 2006. "Strategic Export Promotion," Working Papers 101, University of Milano-Bicocca, Department of Economics, revised Oct 2006.
    15. Patrick Bolton & Gérard Roland, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1057-1090.
    16. Torsten Persson & Guido Tabellini, 1992. "The Politics of 1992: Fiscal Policy and European Integration," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(4), pages 689-701.
    17. Alberto Alesina & Ignazio Angeloni & Federico Etro, 2001. "Institutional Rules for Federations," NBER Working Papers 8646, National Bureau of Economic Research, Inc.
    18. Daniel Brou & Michele Ruta, 2003. "Lobbying, Bargaining and EU Enlargement," Rivista di Politica Economica, SIPI Spa, vol. 93(1), pages 195-216, January-F.
    19. John T. Addison & Claus Schnabel (ed.), 2003. "International Handbook of Trade Unions," Books, Edward Elgar Publishing, number 2705.
    20. Michele Ruta, 2005. "Economic Theories of Political (Dis)integration," Journal of Economic Surveys, Wiley Blackwell, vol. 19(1), pages 1-21, February.
    21. Facchini, Giovanni, 2002. "Why Join a Common Market? The Political Economy of International Factor Mobility in a Multi-country Setting," Working Papers 02-0121, University of Illinois at Urbana-Champaign, College of Business.
    22. Beramendi, Pablo, 2003. "Political institutions and income inequality: The case of decentralization," Discussion Papers, Research Unit: Institutions, States, Markets SP II 2003-09, WZB Berlin Social Science Center.
    23. Ruta, Michele, 2003. "The allocation of competencies in an international union: a positive analysis," Working Paper Series 220, European Central Bank.
    24. Persson, Torsten & Tabellini, Guido, 1996. "Federal Fiscal Constitutions: Risk Sharing and Moral Hazard," Econometrica, Econometric Society, vol. 64(3), pages 623-646, May.
    25. Bordignon, Massimo & Brusco, Sandro, 2001. "Optimal secession rules," European Economic Review, Elsevier, vol. 45(10), pages 1811-1834, December.
    26. Matthias Wrede, 2004. "Small States, Large Unitary States and Federations," Public Choice, Springer, vol. 119(1_2), pages 219-240, April.
    27. Buchanan, James M & Faith, Roger L, 1987. "Secession and the Limits of Taxation: Toward a Theory of Internal Exit," American Economic Review, American Economic Association, vol. 77(5), pages 1023-1031, December.
    28. Sonin, Konstantin, 2010. "Provincial protectionism," Journal of Comparative Economics, Elsevier, vol. 38(2), pages 111-122, June.
    29. Lorz, Oliver & Willmann, Gerald, 2005. "On the endogenous allocation of decision powers in federal structures," Journal of Urban Economics, Elsevier, vol. 57(2), pages 242-257, March.
    30. Alesina, Alberto & Angeloni, Ignazio & Etro, Federico, 2001. "The Political Economy of International Unions," CEPR Discussion Papers 3117, C.E.P.R. Discussion Papers.
    31. Torsten Persson, 1992. "Politics and economic policy," Discussion Paper / Institute for Empirical Macroeconomics 62, Federal Reserve Bank of Minneapolis.
    32. Stehn, Jürgen, 2002. "Towards a European constitution: fiscal federalism and the allocation of economic competences," Kiel Working Papers 1125, Kiel Institute for the World Economy (IfW Kiel).
    33. Grandmont, Jean-Michel, 1978. "Intermediate Preferences and the Majority Rule," Econometrica, Econometric Society, vol. 46(2), pages 317-330, March.
    34. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
    35. Jacques Cremer & Thomas R. Palfrey, 2000. "Federal Mandates by Popular Demand," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 905-927, October.
    36. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    37. Fabrizio De Filippis & Luca Salvatici, 2002. "The Eastward Enlargement of the European Union and the Common Agricultural Policy: the Direct Payments Issue," Rivista di Politica Economica, SIPI Spa, vol. 92(1), pages 321-358, January-F.
    38. Massimo Bordignon & Luca Colombo & Umberto Galmarini, 2003. "Fiscal Federalism and Endogenous Lobbies' Formation," CESifo Working Paper Series 1017, CESifo.
    39. Economides, George & Miaouli, Natasha, 2006. "Federal transfers, environmental policy and economic growth," Journal of Macroeconomics, Elsevier, vol. 28(4), pages 680-699, December.
    40. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    41. Dieter Sadowski & Oliver Ludewig & Florian Turk, 2002. "Europeanization of Collective Bargaining. Centralization Costs and Optimal Wage Bargaining Area," IAAEG Discussion Papers until 2011 200206, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Federico Etro, 2006. "Political geography," Public Choice, Springer, vol. 127(3), pages 321-343, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Libman, Alexander Mikhailovich, 2009. "Эндогенные Границы И Распределение Власти В Федерациях И Международных Сообществах [ENDOGENOUS BOUNDARIES AND DISTRIBUTION OF POWER In the Federation]," MPRA Paper 16473, University Library of Munich, Germany.
    2. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    3. Nikitas Konstantinidis, 2008. "Gradualism and uncertainty in international union formation: The European Community’s first enlargement," The Review of International Organizations, Springer, vol. 3(4), pages 399-433, December.
    4. Grégoire Rota Graziosi, 2009. "On the Strategic Use of Representative Democracy in International Agreements," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(2), pages 281-296, April.
    5. Oliver Lorz & Gerald Willmann, 2013. "Size versus scope: on the trade-off facing economic unions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(2), pages 247-267, April.
    6. Gradstein, Mark, 2004. "Political Bargaining in a Federation: Buchanan meets Coase," CEPR Discussion Papers 4188, C.E.P.R. Discussion Papers.
    7. Staal, Klaas, 2006. "Country size and publicly provided goods," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 187, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    8. Etro, Federico, 2015. "Research in economics and political economy," Research in Economics, Elsevier, vol. 69(3), pages 261-264.
    9. Federico Etro, 2006. "Political geography," Public Choice, Springer, vol. 127(3), pages 321-343, June.
    10. Fabio Fiorillo & Agnese Sacchi, 2012. "The Political Economy of the Standard Level of Services: The Role of Income Distribution," CESifo Working Paper Series 3696, CESifo.
    11. Guillaume Cheikbossian, 2016. "The political economy of (De)centralization with complementary public goods," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(2), pages 315-348, August.
    12. Klaas Staal, 2004. "Country Size and Public Good Provision," Tinbergen Institute Discussion Papers 04-026/1, Tinbergen Institute.
    13. Michele Ruta, 2005. "Economic Theories of Political (Dis)integration," Journal of Economic Surveys, Wiley Blackwell, vol. 19(1), pages 1-21, February.
    14. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482, Elsevier.
    15. Marco Alderighi & Christophe Feder, 2014. "Political competition, power allocation and welfare in unitary and federal systems," Working Paper series 23_14, Rimini Centre for Economic Analysis.
    16. Oliver Lorz & Gerald Willmann, 2008. "Enlargement versus Deepening: The Trade-off Facing Economic Unions," Working Papers of VIVES - Research Centre for Regional Economics 2, KU Leuven, Faculty of Economics and Business (FEB), VIVES - Research Centre for Regional Economics.
    17. Bordignon, Massimo & Brusco, Sandro, 2006. "On enhanced cooperation," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 2063-2090, November.
    18. Federico Etro, 2003. "Globalization and Political Geography," CESifo Working Paper Series 986, CESifo.
    19. K Staal, 2004. "Country size and public good provision," Econometric Society 2004 Australasian Meetings 156, Econometric Society.
    20. Hindriks, Jean & Lockwood, Ben, 2009. "Decentralization and electoral accountability: Incentives, separation and voter welfare," European Journal of Political Economy, Elsevier, vol. 25(3), pages 385-397, September.

    More about this item

    Keywords

    Political Economy; Fiscal Federalism; Monetary Unions;
    All these keywords.

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • H4 - Public Economics - - Publicly Provided Goods
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F0 - International Economics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gde:journl:gde_v63_n3-4_p289-328. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Erika Somma (email available below). General contact details of provider: http://www.gde.unibocconi.it/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.