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Fiscal Federalism in Europe: Is it a Necessary Precondition for a Successful European Economic and Monetary Integration?

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  • Norbert Berthold

Abstract

An important question in the process of European integration concerns the best institutional level for stabilization policies. The theory of fiscal federalism gives criteria for evaluating if fiscal stabilization policies should take place on a centralized or on a decentralized level. This paper firstly discusses the usefulness of such policies. It reaches the conclusion that fiscal stabilization polices are in general not the adequate way of responding to shocks. However, since fiscal stabilization policies appear to be unavoidable for political reasons, the paper secondly discusses on which institutional level such policies should be located. Decentralized fiscal stabilization policies are preferable because they are disciplined more by market forces.

Suggested Citation

  • Norbert Berthold, 1994. "Fiscal Federalism in Europe: Is it a Necessary Precondition for a Successful European Economic and Monetary Integration?," IMF Working Papers 1994/074, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1994/074
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    Cited by:

    1. repec:zbw:bofrdp:1997_008 is not listed on IDEAS
    2. Jääskelä, Jarkko, 1997. "Incomplete insurance market and its policy implication within European Monetary Union," Research Discussion Papers 8/1997, Bank of Finland.
    3. Jääskelä, Jarkko, 1997. "Incomplete insurance market and its policy implication within European Monetary Union," Bank of Finland Research Discussion Papers 8/1997, Bank of Finland.

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