Fiscal Policy in Europe: A Helicopter View / Florin O. Bilbiie, Tommaso Monacelli, Roberto Perotti.

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Bilbiie, Florin O

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TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w28117.Publication details: Cambridge, Mass. National Bureau of Economic Research 2020.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We discuss the main fiscal policy issues in the Eurozone. Our goal is pedagogical: we do not make any new proposal, but try to represent fairly the various sides of the debate. We focus on two issues that are at the core of the current debate. The first is that, right from the start, the government deficit and debt were the key objects of contention in the debate that led to the creation of the Eurozone - and they still are, although the reasons have changed. The second, obvious issue is that a currency union implies the loss of a country-specific instrument, a national monetary policy. This puts a higher burden on fiscal policy as a tool to counteract shocks., a burden that might be even heavier now that the European Central Bank has arguably reached the Zero Lower Bound. Two obvious solutions are mutual insurance between countries; and a centralized stabilization policy. Yet both have been remarkably difficult to come by. We argue that the main reason is fear of persistent, unidirectional transfers between countries, an issue that largely reflects a Northern vs. Southern Europe divide.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w28117 (Browse shelf(Opens below))	Not For Loan

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November 2020.

We discuss the main fiscal policy issues in the Eurozone. Our goal is pedagogical: we do not make any new proposal, but try to represent fairly the various sides of the debate. We focus on two issues that are at the core of the current debate. The first is that, right from the start, the government deficit and debt were the key objects of contention in the debate that led to the creation of the Eurozone - and they still are, although the reasons have changed. The second, obvious issue is that a currency union implies the loss of a country-specific instrument, a national monetary policy. This puts a higher burden on fiscal policy as a tool to counteract shocks., a burden that might be even heavier now that the European Central Bank has arguably reached the Zero Lower Bound. Two obvious solutions are mutual insurance between countries; and a centralized stabilization policy. Yet both have been remarkably difficult to come by. We argue that the main reason is fear of persistent, unidirectional transfers between countries, an issue that largely reflects a Northern vs. Southern Europe divide.