Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/146307
Authors: 
Moyen, Stéphane
Stähler, Nikolai
Winkler, Fabian
Year of Publication: 
2016
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 33/2016
Abstract: 
We discuss how cross-country unemployment insurance can be used to improve international risk sharing. We use a two-country business cycle model with incomplete financial markets and frictional labor markets where the unemployment insurance scheme operates across both countries. Cross-country insurance through the unemployment insurance system can be achieved without affecting unemployment outcomes. The Ramsey-optimal policy however prescribes a more countercyclical replacement rate when international risk sharing concerns enter the unemployment insurance trade-off. We calibrate our model to Eurozone data and find that optimal stabilizing transfers through the unemployment insurance system are sizable and mainly stabilize consumption in the periphery countries, while optimal replacement rates are countercylical overall. Moreover, we find that debt-financed national policies are a poor substitute for fiscal transfers.
Subjects: 
Unemployment Insurance
International Business Cycles
Fiscal Union
International Risk Sharing
JEL: 
E32
E62
H21
J64
ISBN: 
978-3-95729-292-6
Document Type: 
Working Paper

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