Macroeconomic stabilisation properties of a euro area unemployment insurance scheme

Arbeitspapier

In this paper we use a medium-scale DSGE model to quantitatively assess the macroeconomic stabilisation properties of a supranational unemployment insurance scheme. The model is calibrated to the euro area's core and periphery and features a rich fiscal sector, sovereign risk premia and labour market frictions. Adopting both simple policy rules and optimal policies, our simulations point to enhanced business cycle synchronisation and interregional consumption smoothing. Depending on the exact specification, the results suggest a reduction in the volatility of consumption by up to 49% at the region-level, while the cross-regional correlation of unemployment and in ation increases by up to 52% and 27%, respectively, compared to the decentralised setting. The higher degree of inter-regional risksharing comes at the cost of sizable fiscal transfers. Limiting such transfers via claw-back mechanisms implies a much weaker degree of stabilisation across countries.

Object Details

• ISBN: 978-92-899-4071-9
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2428

Classification and Topics

• Classification: Wirtschaft ; Macroeconomic Issues of Monetary Unions ; Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy ; Fiscal Policy ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
• Subject: Monetary union ; Fiscal union ; Unemployment insurance ; Optimal policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kaufmann, Christoph ; Attinasi, Maria Grazia ; Hauptmeier, Sebastian
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2020

Further information

• DOI: doi:10.2866/657604
• Handle: http://hdl.handle.net/10419/229042
• Last update: 10.03.2025, 11:41 AM CET