This paper addresses arguments that a system of fiscal insurance between member states of the European Union is needed to act in replacement of nominal exchange rate flexibility as an automatic stabilizer under monetary union. Many authors have argued or assumed that asymmetric real...

This paper addresses the question of the joint conduct of fiscal and monetary policy in a currency union. The problem is studied using a two-country DSGE framework with staggered price setting, monopolistic competition in the goods market, distortionary taxation and nominal debt. The two...

This paper analyzes the effects of the implementation of a monetary union on the international transmission of monetary and fiscal policies. A dynamic three-country general equilibrium model, exhibiting monopolistic competition and sticky prices, is used to show how asymmetric monetary and...

It is widely debated whether a monetary union has to be accompanied by a fiscal transfer scheme to accommodate asymmetric shocks. We build a model of a monetary union with a central bank and two heterogeneous countries that are linked by a fiscal transfer scheme with repercussions on monetary...

We provide empirical estimates of the risksharing and redistributive properties of fiscal equalization among the states of the German federation. Fiscal equalization serves as a mechanism to insure state budgets against asymmetric revenue shocks, but provides almost no insurance against regional...