Fiscal Federalism in Europe: Is it a Necessary Precondition for a Successful European Economic and Monetary Integration?
Summary:
An important question in the process of European integration concerns the best institutional level for stabilization policies. The theory of fiscal federalism gives criteria for evaluating if fiscal stabilization policies should take place on a centralized or on a decentralized level. This paper firstly discusses the usefulness of such policies. It reaches the conclusion that fiscal stabilization polices are in general not the adequate way of responding to shocks. However, since fiscal stabilization policies appear to be unavoidable for political reasons, the paper secondly discusses on which institutional level such policies should be located. Decentralized fiscal stabilization policies are preferable because they are disciplined more by market forces.
Series:
Working Paper No. 1994/074
Subject:
Adjustment process Balance of payments Economic integration Fiscal federalism Fiscal policy Fiscal stimulus Monetary unions
English
Publication Date:
June 1, 1994
ISBN/ISSN:
9781451849523/1018-5941
Stock No:
WPIEA0741994
Pages:
24
Please address any questions about this title to publications@imf.org