Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/179680 
Year of Publication: 
2018
Citation: 
[Journal:] DIW Weekly Report [ISSN:] 2568-7697 [Volume:] 8 [Issue:] 22/23 [Publisher:] Deutsches Institut für Wirtschaftsforschung (DIW) [Place:] Berlin [Year:] 2018 [Pages:] 193-200
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
Reorganizing European fiscal policy is a main topic in current reform considerations. In particular, the creation of a European stabilization mechanism is being discussed. This study examines the macroeconomic effects of a stabilization fund, the economic consequences of which are analyzed in an equilibrium model. The model shows that a stabilization fund reduces economic fluctuations and is thus a mechanism for making the entire currency area more crisis-proof in the future. However, it should be noted that a stabilization fund may be more politically feasible than shifting responsibility from the national level to a new European Ministry of Finance. Moreover, moral hazard in regards to the behavior of individual countries must be taken into account when designing the stabilization fund. For example, parallel to the introduction of a European stabilization fund, compliance with fiscal rules should be effectively enforced.
Subjects: 
monetary union
stabilization fund
fiscal policy
JEL: 
E32
E63
F45
Document Type: 
Article

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