We explore how members of a collective pension scheme can share inflation risks in the absence of suitable financial market instruments. Using intergenerational risk sharing arrangements, risks can be allocated better across the various participants of a collective pension scheme than would be...

We investigate numerically how indexation of funded pensions for inflation can be differentiated across the various groups of fund participants. The pension arrangement is modelled after the Dutch situation. While the aggregate welfare consequences are small, group-specific consequences are more...

We analyze the political stability of funded social security. Using a stylized theoretical framework we study the mechanisms behind governments capturing social security assets in order to lower current taxes. The results and the driving mechanisms carry over to a fully-fledged and carefully...

Recent debate has focused on the introduction of a central stabilisation capacity as a completing element of the Economic and Monetary Union. Its main objective would be to contribute cushioning country-specific economic shocks, especially when national fiscal stabilisers are run down. There are...

We explore endogenous monetary unification in the context of a model in which a country with serious structural distortions (and, hence, high inflation) is admitted into a monetary union once its economic structure has converged sufficiently towards that of the existing participants. If...

Recently, Svensson (1997) has shown that a combination of state-contingent inflation targeting and central banker conservatism produces optimal monetary policy if employment is persistent. We argue that the state-contingent nature of the scheme may undermine its credibility. We then show that...

Because they exert cross-border spillover effects, fiscal policies of individual EU member states are a common concern for the entire EU.

This paper proposes a central fiscal capacity for the euro area that generates transfers in response to euro area, country, and region-specific shocks. The main novelty of this fiscal capacity is that it allows a joint response to these three types of shocks within a single scheme. Based on...

This paper presents evidence of profit shifting in response to differences in corporate tax rates for a large selection of OECD countries. In our estimates we control for the effects of tax rate changes on real activity. Our baseline estimates suggest that, on average, a unilateral increase in...

The combination of discretionary monetary policy, labor-market distortions and nominal wage rigidity yields an inflation bias as monetary policy tries to exploit nominal wage contracts to address labour-market distortions Although an inflation target eliminates this inflation bias, it creates a...