Fiscal Federalism and European Integration: Implications for Fiscal and Monetary PoliciesThis paper examines European economic integration in light of standard thinking about fiscal federalism. We first describe the main features of European integration, analyzing how institutions in the European Union fit the prescriptions of a federal system. We find that in some areas the European Union has already developed arrangements that fit standard views of fiscal federalism, in other areas there is gradual movement toward prescribed arrangements, and in still other areas the European Union's unique historical path may suggest some interesting new departures in the federalism literature. We try to extract some lessons from this analysis: some recommendations for Europe based on the orthodox principles of fiscal federalism, and some modifications of these orthodox principles based on the European experience. |
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area-wide Austria automatic fiscal stabilizers Belgium Bertaut Board of Governors cap room central government conditions in individual Council deficits and debt develop differential fiscal policy differential shocks ECB Monthly Bulletin effective tax rates Eichengreen euro area euro zone European Commission European economic integration EUROPEAN INTEGRATION European Union Eurosystem Federal Reserve System FEDERALISM AND EUROPEAN Finance Discussion Papers Finland fiscal deficits fiscal federalism Germany Growth Pact harmonized IMPLICATIONS FOR FISCAL International Finance Discussion Italy Iyigun Jeremy Piger Jonathan H labor income labor mobility level of government Maastricht Limit Maastricht Treaty member countries mobile factors monetary policy monetary union national central banks national governments Netherlands OECD output gaps percent of GDP Portugal potential output problem rates on labor role slowdown Spain spending programs Stability and Growth structural correlations supervisory responsibilities tax competition tax programs taxation taxes on mobile Taylor Rule theory of fiscal UNIVERSITY OF CALIFORNIA unpublished manuscript VAT rates Warnock