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The regional-stabilisation properties of fiscal arrangements

In: Improving Economic and Social Cohesion in the European Community

Author

Listed:
  • Alexander Italianer
  • Jean Pisani-Ferry

Abstract

The steps leading to the signature of the Treaty on European Union in Maastricht have refuelled the debate about whether a single European currency would need to be accompanied by a large budget at Community level, an equalisation scheme, a special “shock-absorbing” mechanism or a combination of these devices. One of the main arguments in favour of such a parallelism in the process of unification is that without a sizeable EC budget, monetary union would lack the automatic stabilisers needed to compensate states for the loss of the exchange rate as an adjustment instrument (a view taken by, for instance, Krugman, 1992 and Feldstein, 1992). As developed in Goodhart and Smith (1992), the case for regional stabilisation rests on the Keynesian assumption of market imperfections (especially price/wage rigidities) which prevent instantaneous market clearing. This is indeed a basic assumption in all the literature dealing with stabilisation properties of federal budgetary systems. It is therefore retained hereafter without further discussion.

Suggested Citation

  • Alexander Italianer & Jean Pisani-Ferry, 1994. "The regional-stabilisation properties of fiscal arrangements," Palgrave Macmillan Books, in: Jørgen Mortensen (ed.), Improving Economic and Social Cohesion in the European Community, chapter 11, pages 155-194, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-23438-7_11
    DOI: 10.1007/978-1-349-23438-7_11
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    Citations

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    Cited by:

    1. Rui Alves & Oscar Afonso, 2007. "The "New" Stability and Growth Pact: More Flexible, Less Stupid?," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 42(4), pages 218-225, July.
    2. Rui Henrique Alves, 2004. "Europe: Looking for a New Model," FEP Working Papers 154, Universidade do Porto, Faculdade de Economia do Porto.
    3. Lannoo, Karel & Wyplosz, Charles & Bénassy-Quéré, Agnès, 1999. "Financial supervision and policy coordination in the EMU," ZEI Working Papers B 11-1999, University of Bonn, ZEI - Center for European Integration Studies.
    4. Rui Henrique Alves, 2004. "New Constitution, New Europe: What About (Fiscal) Federalism?," ERSA conference papers ersa04p652, European Regional Science Association.
    5. László Andor, 2016. "Towards shared unemployment insurance in the euro area," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-15, December.

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