This dissertation consists of three chapters on fiscal and monetary integration in Europe. The first chapter investigates quantitatively the benefits from participation in the Economic and Monetary Union for individual Euro area countries. The synthetic control method is used to estimate how real GDP per capita would have developed for the EMU member states, if those countries had not joined the EMU. The estimates show that most countries have profited from having the euro, though the crisis leads to negative effects of EMU membership. The PIGS countries in particular would have been better off if they had not been an EMU member during the crisis. The second chapter examines the effectiveness of an automatic fiscal transfer mechanism for the Economic and Monetary Union. A transfer scheme is incorporated into a DSGE model for a monetary union with an extensive fiscal sector. Using a heterogeneous setup, the model is estimated for the North and the South of Europe using Bayesian methods. The transfer mechanism is shown to be effective in stabilizing the economy of the southern block of countries during the financial crisis, although the total welfare effect for the EMU is negative, though small. Ex ante, a transfer mechanism would be beneficial for both the North and the South in terms of welfare and stabilization purposes. In the third chapter, an EMU-wide unemployment insurance is incorporated into an estimated DSGE model for the Euro area. The European unemployment benefit scheme, if introduced in 2013 replacing the regional systems, would have had positive risk sharing effects on the North and the South. If this introduction would have led to a higher level of the unemployment benefit in a region, unemployment would have increased. Ex ante, the European unemployment benefit scheme would be beneficial for both the northern and southern block of countries in terms of welfare and stabilization of employment. Labor market harmonization would lead to higher gains from European unemployment insurance
