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Fiscal Integration and Growth Stimulation in Europe1

Published online by Cambridge University Press:  17 August 2016

Jacques H. Drèze ,
Alain Durré  and
Jean-François Carpantier
Jacques H. Drèze
Affiliation:
CORE, Université catholique de Louvain. E-mail: [email protected]
Alain Durré
Affiliation:
IÉSEG-School of Management (Lille Catholic University) and LEM-CNRS (U.M.R. 8179). E-mail: [email protected]
Jean-François Carpantier
Affiliation:
CREA, University of Luxembourg. E-mail: [email protected]
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Summary

With the current sovereign debt crisis, the incompleteness of economic integration in the Economic and Monetary Union (EMU) has become patent, leading to an intense debate among academics and policy makers. Much of the debate concerns fiscal rules and austerity measures, both of which weigh on growth prospects. In this paper we look at the main structural shortcomings of EMU through the lens of general equilibrium theory. We address two issues (international sharing of macroeconomic risks and coordinated growth stimulation) which are at the heart of the sustainability of EMU. We propose: (A) a specific scheme for mutual insurance of macroeconomic risks; (B) locating responsibility for demand policies at the EMU level, with ambitious investment programs (public, or fiscally-neutral private) as main instrument.

Dans le cadre de la crise frappant aujourd’hui les dettes souveraines, le défaut d’intégration économique dans l’Union Économique et Monétaire (UEM) ressort clairement et nourrit un débat intense parmi les chercheurs et les responsables politiques. Le débat concerne surtout la discipline budgétaire et les politiques d’austérité, qui pèsent toutes deux sur les perspectives de croissance. Dans cet article, nous évaluons les principaux défauts structurels de l’UEM à la lumière de la théorie de l’équilibre général. Nous reprenons deux questions centrales pour la stabilité de l’UEM: la répartition internationale des risques macroéconomiques et la coordination des politiques de stimulation de la croissance. Nous proposons: (A) un schéma spécifique d’assurance mutuelle des risques macroéconomiques; (B) le transfert au niveau UEM de la conduite des politiques de demande, avec comme instrument des programmes ambitieux d’investissements (publics, ou privés mais budgétairement neutres).

Keywords

General equilibrium modelrisk sharinggrowth stimulationfiscal integrationindexed bondsE24E63H63Modèle d’équilibre généralpartage de risquesstimulation de la croissanceintégration budgétaireEMUobligations indexéesE24E63H63
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 80 , Issue 2 , 2014 , pp. 5 - 45
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2015 

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Footnotes

1

The views expressed in this paper are exclusively those of the authors and do not necessarily reflect the views of the institutions to which they are affiliated. The authors thank an anonymous referee for highly valuable suggestions and Pierre Laconte for useful references. They also thank warmly Jagjit Chadha, Isabelle and Jean Dermine, Gauthier Dupont, Charles Goodhart, Jean-Jacques Herings, Jean Hindriks, Sylvain Plasschaert, Martine Quinzii and Jean-Pierre Vidal for their helpful observations and suggestions on a previous version of the article.

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