Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229042
Authors: 
Kaufmann, Christoph
Attinasi, Maria Grazia
Hauptmeier, Sebastian
Year of Publication: 
2020
Series/Report no.: 
ECB Working Paper No. 2428
Abstract: 
In this paper we use a medium-scale DSGE model to quantitatively assess the macroeconomic stabilisation properties of a supranational unemployment insurance scheme. The model is calibrated to the euro area's core and periphery and features a rich fiscal sector, sovereign risk premia and labour market frictions. Adopting both simple policy rules and optimal policies, our simulations point to enhanced business cycle synchronisation and interregional consumption smoothing. Depending on the exact specification, the results suggest a reduction in the volatility of consumption by up to 49% at the region-level, while the cross-regional correlation of unemployment and in ation increases by up to 52% and 27%, respectively, compared to the decentralised setting. The higher degree of inter-regional risksharing comes at the cost of sizable fiscal transfers. Limiting such transfers via claw-back mechanisms implies a much weaker degree of stabilisation across countries.
Subjects: 
Monetary union
Fiscal union
Unemployment insurance
Optimal policy
JEL: 
F45
E63
E62
E24
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-4071-9
Document Type: 
Working Paper

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