Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130442
Authors: 
Oksanen, Heikki
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 5817
Abstract: 
The euro area will not have a centralised budget and smoothing of country-specific asymmetric shocks via private financial markets will develop only slowly. Mistrust among the governments has caused rigid, even pro-cyclical fiscal policies. Smoothing mechanisms are absent due to the fear that the transfers would develop into permanent redistribution. For removing these deficiencies we propose a transfer mechanism to be managed in periods of seven years so that the cumulative balance of each country is cleared in equal instalments during the subsequent 7-year period. The transfers would smoothen asymmetric shocks and alleviate the rigidity of the fiscal rules.
Subjects: 
euro
monetary union
smoothing shocks
fiscal transfers
government budget
JEL: 
E42
E62
H10
Document Type: 
Working Paper

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