The volume collects the essays presented at the 15th Workshop on Public Finance organised by Banca d'Italia in Perugia from 4 to 6 April 2013. The workshop focused on the link between fiscal policy and macroeconomic imbalances and comprised four sessions. The first session concentrated on the...

In light of persistent in ation dispersion and rising debt levels in the EMU, this paper investigates the welfare implications of budget-neutral scal policies that counteract in ation di erentials. In a two-country DSGE model of a monetary union with traded and non-traded goods a national scal...

Between 1999 and the onset of the economic crisis in 2008 real exchange rates in Greece, Ireland, Italy, Portugal and Spain appreciated relative to the rest of the euro area. This divergence in competitiveness was reflected in the emergence of current account imbalances. Given that exchange rate...

The recent reform of the Stability and Growth Pact provides more leeway for EU governments to temporarily breach the 3% deficit limit if this facilitates the implementation of initially expensive reforms. But the implementation of this principle is not obvious as budgets would need to specify...

We argue that the institutional framework of the eurozone was designed to deny a role for fiscal policy. However, the Great Recession of 2008–2009 forced governments to intervene, mainly to avoid the collapse of their financial systems. At the same time, the severe recession implied a decrease...

In light of persistent in ation dispersion and rising debt levels in the EMU, this paper investigates the welfare implications of budget-neutral scal policies that counteract in ation di erentials. In a two-country DSGE model of a monetary union with traded and non-traded goods a national scal...

In this essay we study the optimal noncoordinated fiscal policy in a monetary union, where a common and independent monetary authority commits to optimally set the union-wide nominal interest rate. The national governments in the monetary union implement independent fiscal policies by choosing...

Membership in a currency union is not irreversible. Exit expectations may emerge during sovereign debt crises, because exit allows countries to reduce their liabilities through a currency redenomination. As market participants anticipate this possibility, sovereign debt crises intensify. We...

The gap between the interest rates of different members of the European Monetary Union (EMU) points out to an imperfect degree of financial integration despite the common currency. This paper develops a two-country New Open Economy Macroeconomics (NOEM) model with imperfect financial integration...

In this essay we study the optimal non-coordinated fiscal policy in a monetary union, where a common and independent monetary authority commits to optimally set the union-wide nominal interest rate. The national governments in the monetary union implement independent fiscal policies by choosing...