A Fiscal Union for the Euro: Some Lessons from History
(2013) In CESifo Economic Studies 59(3). p.449-488- Abstract
- The recent financial crisis starting in 2007-2009 is the longest and the deepest recession since the Great Depression of 1930. The crisis that originated in the US subprime mortgage markets spread and amplified through international financial markets and resulted in severe debt crises in several European countries. Events revealed that the European Union (EU) had insufficient means to halt the spiral of the European debt crisis. The aim of this study is to identify the characteristics of a robust common fiscal policy framework that could have alleviated the consequences of the recent crisis. This is done by using the political and fiscal history of five federal states: Argentina, Brazil, Canada, Germany, and the USA. Our study suggests... (More)
- The recent financial crisis starting in 2007-2009 is the longest and the deepest recession since the Great Depression of 1930. The crisis that originated in the US subprime mortgage markets spread and amplified through international financial markets and resulted in severe debt crises in several European countries. Events revealed that the European Union (EU) had insufficient means to halt the spiral of the European debt crisis. The aim of this study is to identify the characteristics of a robust common fiscal policy framework that could have alleviated the consequences of the recent crisis. This is done by using the political and fiscal history of five federal states: Argentina, Brazil, Canada, Germany, and the USA. Our study suggests that a fiscal union is necessary to avoid divergent fiscal policies and we identify five conditions crucial for it to function effectively: (i) a credible commitment to a no-bailout rule, (ii) a degree of revenue and expenditure independence reflecting the preferences of the voters, (iii) a well-functioning European system of transfers in times of distress, (iv) the creation of a euro bond market serviced by taxes collected by the EU government, (v) the ability to learn from and adapt to changing economic and political circumstances. (JEL codes: H10, H70, H73). (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/4025591
- author
- Bordo, Michael D. ; Jonung, Lars LU and Markiewicz, Agnieszka
- organization
- publishing date
- 2013
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- fiscal federalism, euro, ECB, fiscal policy, monetary union, optimal, currency area
- in
- CESifo Economic Studies
- volume
- 59
- issue
- 3
- pages
- 449 - 488
- publisher
- Oxford University Press
- external identifiers
-
- wos:000323349200002
- scopus:84882616724
- ISSN
- 1610-241X
- DOI
- 10.1093/cesifo/ift001
- language
- English
- LU publication?
- yes
- id
- 68058fd0-26aa-4b9d-bd7b-596ee84a057c (old id 4025591)
- date added to LUP
- 2016-04-01 14:08:13
- date last changed
- 2022-04-22 01:22:59
@article{68058fd0-26aa-4b9d-bd7b-596ee84a057c,
abstract = {{The recent financial crisis starting in 2007-2009 is the longest and the deepest recession since the Great Depression of 1930. The crisis that originated in the US subprime mortgage markets spread and amplified through international financial markets and resulted in severe debt crises in several European countries. Events revealed that the European Union (EU) had insufficient means to halt the spiral of the European debt crisis. The aim of this study is to identify the characteristics of a robust common fiscal policy framework that could have alleviated the consequences of the recent crisis. This is done by using the political and fiscal history of five federal states: Argentina, Brazil, Canada, Germany, and the USA. Our study suggests that a fiscal union is necessary to avoid divergent fiscal policies and we identify five conditions crucial for it to function effectively: (i) a credible commitment to a no-bailout rule, (ii) a degree of revenue and expenditure independence reflecting the preferences of the voters, (iii) a well-functioning European system of transfers in times of distress, (iv) the creation of a euro bond market serviced by taxes collected by the EU government, (v) the ability to learn from and adapt to changing economic and political circumstances. (JEL codes: H10, H70, H73).}},
author = {{Bordo, Michael D. and Jonung, Lars and Markiewicz, Agnieszka}},
issn = {{1610-241X}},
keywords = {{fiscal federalism; euro; ECB; fiscal policy; monetary union; optimal; currency area}},
language = {{eng}},
number = {{3}},
pages = {{449--488}},
publisher = {{Oxford University Press}},
series = {{CESifo Economic Studies}},
title = {{A Fiscal Union for the Euro: Some Lessons from History}},
url = {{http://dx.doi.org/10.1093/cesifo/ift001}},
doi = {{10.1093/cesifo/ift001}},
volume = {{59}},
year = {{2013}},
}