A Regional Investment Project: A Balance between Fiscal Powers

1 Fiscal Flows , Fiscal Balance , and Fiscal Sustainability Richard

The search for “fiscal indicators” to provide a short-hand (and preferably quantitative) picture of the size, direction, and nature of intergovernmental finance – and, ideally, some guidance for policy designed to improve outcomes – appears to be neverending. “Fiscal balance” and “fiscal sustainability” are, for example, terms commonly heard in discussions of intergovernmental fiscal relations....

When Does a Central Bank’s Balance Sheet Require Fiscal Support?

The large balance sheet of many central banks has raised concerns that they could suffer significant losses if interest rates rose, and might need a capital injection from the fiscal authority. This paper constructs a simple deterministic general equilibrium model, calibrated to US data, to study the the impact of alternative interest rates scenarios on the central bank’s balance sheet. We show...

Delegating Investment in a Common-Value Project

I investigate the problem of delegating an investment e ort when it is not known in advance which rm is most e cient, or whether the investment should be made at all. The motivating problem is that of commissioning R&D instead of relying on patent incentives. Firms have di erent private signals of a project's private (and social) value, and di erent costs of achieving it. I show that the two al...

Emerging Powers in Regional Architecture

Spillovers of Regional Fiscal Policies in a Monetary Union∗

This paper studies the design of monetary policy in a fiscal federation, such as the European Union. The focus of the analysis is the interaction between the fiscal policy of member countries (regions) and the monetary authority. Each of the countries structures its fiscal policy (spending and taxes) with the interests of its citizens in mind. Thus each country perceives a gain to shifting its ...