Fiscal Federalism in Europe: Is it a Necessary Precondition for a Successful European Economic and Monetary Integration?
June 1, 1994
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Summary
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.
Subject: Adjustment process, Balance of payments, Economic integration, Fiscal federalism, Fiscal policy, Fiscal stimulus, Monetary unions
Keywords: adjustment capacity, Adjustment process, core countries in the EC, core countries of the EC, country, does fiscal policy, Europe, expansionary fiscal policies in a monetary union, Fiscal federalism, fiscal policy in a monetary union, fiscal policy in the EC, fiscal policy instrument, Fiscal stimulus, goods market, market mechanism, market principle, monetary union, Monetary unions, rule-bound fiscal policy, WP
Pages:
24
Volume:
1994
DOI:
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Issue:
074
Series:
Working Paper No. 1994/074
Stock No:
WPIEA0741994
ISBN:
9781451849523
ISSN:
1018-5941
