Bericht
Post-crisis lesson for EMU governance from the principal-agent approach
This paper contributes to the ongoing debate on fiscal consolidation and the questionable effectiveness of the Stability and Growth Pact by addressing the problem of economic governance in the EMU with a game-theoretic principal-agent approach. Following the theory of delegation, we develop a principal-multi agent model where the EMU authorities act as a collective principal that designs contracts for each of two agents that reflect Europe's "South" and "North". We investigate what happens when agents face hidden-information moral hazard problem and when they are able to coordinate their actions. Bearing in mind the applicability of incentive mechanisms, we discuss the optimal contracts for the principal and each of the agents. We prove that the most efficient solution consists of tailor-made contracts, according to which highly indebted countries must be offered strong incentive mechanisms in the form of substantial penalties but also rewards (e.g., preferential loans). We also stress the importance of taking into account positive spillover effects, which could be facilitated by economic integration and fiscal policy coordination between the EMU Members.
- ISBN
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978-83-7178-586-3
- Language
-
Englisch
- Bibliographic citation
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Series: CASE Network Studies & Analyses ; No. 457
- Classification
-
Wirtschaft
Asymmetric and Private Information; Mechanism Design
Policy Objectives; Policy Designs and Consistency; Policy Coordination
National Budget, Deficit, and Debt: General
- Subject
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Moral Hazard
Principal-Agent
EU Economic Governance
Fiscal Compact
EU-Politik
Wirtschaftspolitik
Prinzipal-Agent-Theorie
Moral Hazard
Europäischer Stabilitätsmechanismus
Eurozone
EU-Staaten
- Event
-
Geistige Schöpfung
- (who)
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Barbone, Luca
Poniatowski, Grzegorz
- Event
-
Veröffentlichung
- (who)
-
Center for Social and Economic Research (CASE)
- (where)
-
Warsaw
- (when)
-
2013
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Bericht
Associated
- Barbone, Luca
- Poniatowski, Grzegorz
- Center for Social and Economic Research (CASE)
Time of origin
- 2013
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