Fiscal Challenges in Multilayered Unions: An Overview and Case Study

38 Pages Posted: 14 Oct 2014 Last revised: 16 Oct 2014

See all articles by Joshua Aizenman

Joshua Aizenman

University of Southern California - Department of Economics; National Bureau of Economic Research (NBER)

Gunnar Gunnarsson

Central Bank of Iceland

Date Written: October 2014

Abstract

This paper reviews recent research dealing with fiscal discipline and revisit the issues of fiscal control in federal systems, focusing on selective case studies covering the 2000s, before and after the Global Financial Crisis (GFC). We start by contrasting the recent fiscal history of California to that of Greece, illustrating the different ways of dealing with fiscal deficiencies in a mature union, U.S., versus a young union, Eurozone. We continue with an overview of the fiscal developments in Brazil, illustrating the challenges facing federal systems in emerging markets, and possible ways to move forward in upgrading a country's fiscal institutions. We conclude with the fiscal history of Iceland before and after the financial crisis--a standalone small country, assessed favorably by rating agencies prior to the GFC, and now recovering from a deep financial crisis.

Suggested Citation

Aizenman, Joshua and Gunnarsson, Gunnar, Fiscal Challenges in Multilayered Unions: An Overview and Case Study (October 2014). NBER Working Paper No. w20564. Available at SSRN: https://ssrn.com/abstract=2510061

Joshua Aizenman (Contact Author)

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Gunnar Gunnarsson

Central Bank of Iceland ( email )

Reykjavík
Iceland

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