Creating a Sustainable EMU: A Proposal for a Semi-Automatic Stabilisation Mechanism

Whyman, Philip B orcid iconORCID: 0000-0002-3926-1019 (2010) Creating a Sustainable EMU: A Proposal for a Semi-Automatic Stabilisation Mechanism. In: Progress in Economics Research. Progress in Economics Research, 18 (18). Nova Science Publishers, Hauppauge, NY, pp. 1-26. ISBN 978-1-61728-625-4

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Abstract

The persistence of asymmetric shocks affecting the Economic and Monetary Union (EMU), established within the European Union (EU), necessitates a consideration of an expanded role for fiscal policy stabilisation. Having examined principles for fiscal policy assignment and EMU's impact upon economic policy flexibility, the paper develops a semiautomatic stabilisation model dependant upon the output cost of unemployment for individual member states. The distributional impact is estimated via a simulation of how the system would have operated by reference to a time period encompassing a full economic cycle and the previous two recessionary episodes, namely 1982-1996. Conclusions emphasise the importance of the method of finance, the difficulty in securing consensus around a design and the desirability for a complementary structural programme.


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