@techreport{Kletzer1997Macroeconomic,
abstract = {The implications of monetary unification for fiscal policies are discussed. The roles
of nominal exchange rate flexibility in the presence of asymmetric national shocks and
nominal price rigidities as an automatic stabilizer and source of disturbances to real economic
performance are reviewed. Two main themes are considered. The first is whether a system
of fiscal insurance across member states qualitatively replicates the effects of autonomous
monetary policy instruments when exchange rates are permanently fixed. It is argued that
while fiscal insurance schemes increase the instruments available to fiscal authorities to
influence resource allocation, they do not augment existing fiscal instruments in a manner that
replicates monetary policy under long-run monetary neutrality in an overlapping generations
economy. Restrictions imposed on national fiscal instruments as a condition of monetary
unification may give rise to a need for fiscal insurance to replace their role as stabilizers. The
second theme addresses whether political unification is a necessary logical conclusion of the
usefulness of fiscal insurance scheme. The argument that sustainable insurance arrangements
can be devised without foregoing national sovereignty over fiscal policymaking is discussed.},
address = {Bonn},
author = {Kenneth M. Kletzer},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {F41; F42; E6; 330; monetary union; exchange rate regimes; fiscal insurance; fiscal policy coordination; W\"{a}hrungsunion; Finanzpolitik; Finanzf\"{o}deralismus; Europ\"{a}ische Wirtschafts- und W\"{a}hrungsunion; Schock; Ov},
language = {eng},
number = {B 04-1997},
publisher = {ZEI},
title = {Macroeconomic stabilization with a common currency: Does European Monetary Unification create a need for fiscal insurance of federalism?},
type = {ZEI working paper},
url = {http://hdl.handle.net/10419/39472},
year = {1997}
}
