Euro Area unemployment insurance at the time of zero nominal interest rates

Abstract

This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. ECO/WKP(2018)46 Unclassified English -Or. English ECO/WKP(2018)46 2 OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author(s).Working Papers describe preliminary results or research in progress by the author(s) and are published to stimulate discussion on a broad range of issues on which the OECD works.Comments on Working Papers are welcomed, and may be sent to OECD Economics Department, 2 rue André Pascal, 75775 Paris Cedex 16, France, or by e-mail to eco.contact@oecd.org.All Economics Department Working Papers are available at www.oecd.org/eco/workingpapers. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.On 3 May 2018, the OECD Council invited Lithuania to become a Member. At the time of preparation the deposit of Lithuania's instrument of accession to the OECD Convention was pending and therefore Lithuania does not appear in the list of OECD Members and is not included in the OECD zone aggregates.On 25 May 2018, the OECD Council invited Colombia to become a Member. At the time of preparation the deposit of Colombia's instrument of accession to the OECD Convention was pending and therefore Colombia does not appear in the list of OECD Members and is not included in the OECD zone aggregates. © OECD (2018)You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for commercial use and translation rights should be submitted to rights@oecd.org ECO/WKP(2018)46 3 ABSTRACT/RÉSUMÉ Euro Area unemployment insurance at the time of zero nominal interest ratesThe discussion about a fiscal stabilisation capacity as a way of providing more fiscal integration in the euro area has strengthened in the aftermath of the European sovereign debt crisis. Among the instruments that can be used for temporary macroeconomic stabilisation in the presence of both asymmetric and area-wide shocks, a euro area unemployment insurance scheme has attracted increased attention. We build a two-region DSGE model with supply, demand and labour market...

A Euro Area Macroeconomic Stabilisation Function: Assessing Options in View of Their Redistribution and Stabilisation Properties

“…11 However, when monetary policy is constrained by the zero lower bound -as in the later years of the sample analysed in this paper -the fiscal multipliers for government spending in particular might be much higher than monetary policy that is unconstrained. This is explicitly taken into account in recent analyses (Arnold et al, 2018, Claveres andStráský, 2018) of the effects of EUI schemes on the euro area. While some studies even obtain multipliers of more than 2 for government spending when monetary policy is constrained (Eggertsson, 2011, Christiano et al, 2011, more recent studies indicate that in the event of more forward-looking expectations about monetary policy, the multiplier is likely to be not much more than 1 (Hills and Nakata, 2014;Swanson and Williams, 2014).…”

“…CEPS, 2018), international institutions (e.g. Arnold et al, 2018, Claveres andStráský, 2018) and policy circles (e.g. European Commission, 2017 or Padoan, 2016).…”