Abstract
The classic argument for a euro area “fiscal capacity”, understood in this contribution as a centralised fiscal stabiliser, revolves around the need to dampen the effects of asymmetric shocks. According to those preaching this conventional wisdom, a common fiscal stabiliser designed along the lines of the US federal fiscal system would have stabilised incomes in member states hit the hardest, thereby avoiding the divergence that has unfolded in the aftermath of the financial crisis between the South, led by Italy and Greece, and the North, led by Germany and the Benelux countries.
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The authors are grateful to Paolo D’Imperio for data support and insightful discussions. This article draws on C. Alcidi, G. Thirion: Fiscal risk-sharing in response to shocks: New lessons for the euro area from the US, CEPS Working Document 05-2017, Centre for European Policy Studies, 2017. The latter paper was prepared in the context of the Horizon 2020 project “FIRSTRUN — Fiscal Rules and Strategies under Externalities and Uncertainties”.
Cinzia Alcidi, Centre for European Policy Studies, Brussels, Belgium.
Gilles Thirion, Centre for European Policy Studies, Brussels, Belgium.
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Alcidi, C., Thirion, G. The Stabilising Role of US Federal Fiscal Institutions — What Lessons for the Euro Area?. Intereconomics 52, 137–142 (2017). https://doi.org/10.1007/s10272-017-0662-y
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DOI: https://doi.org/10.1007/s10272-017-0662-y