Market-Based Fiscal Discipline in Monetary Unions

Market-Based Fiscal Discipline in Monetary Unions PDF Author: Mr.Morris Goldstein
Publisher: International Monetary Fund
ISBN: 1451851200
Category : Business & Economics
Languages : en
Pages : 40

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Book Description
The concept of market-based fiscal discipline posits that a government which runs persistent, excessive fiscal deficits will face an increased cost of borrowing and eventually, a reduced availability of credit, and that these market actions will provide an incentive to correct irresponsible fiscal behavior. This paper presents new empirical evidence on market-based fiscal discipline by estimating the relationship between the cost of borrowing and fiscal policy behavior across U.S. states. We find that U.S. states which have followed more prudent fiscal policies are perceived by the market as having lower default risk and are therefore able to reap the benefit of lower borrowing costs.

Market-Based Fiscal Discipline in Monetary Unions

Market-Based Fiscal Discipline in Monetary Unions PDF Author: Mr.Morris Goldstein
Publisher: International Monetary Fund
ISBN: 1451851200
Category : Business & Economics
Languages : en
Pages : 40

Get Book Here

Book Description
The concept of market-based fiscal discipline posits that a government which runs persistent, excessive fiscal deficits will face an increased cost of borrowing and eventually, a reduced availability of credit, and that these market actions will provide an incentive to correct irresponsible fiscal behavior. This paper presents new empirical evidence on market-based fiscal discipline by estimating the relationship between the cost of borrowing and fiscal policy behavior across U.S. states. We find that U.S. states which have followed more prudent fiscal policies are perceived by the market as having lower default risk and are therefore able to reap the benefit of lower borrowing costs.

Market-Based Fiscal Discipline in Monetary Unions

Market-Based Fiscal Discipline in Monetary Unions PDF Author: Geoffrey R. Woglom
Publisher:
ISBN:
Category :
Languages : en
Pages : 40

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Book Description
The concept of market-based fiscal discipline posits that a government which runs persistent, excessive fiscal deficits will face an increased cost of borrowing and eventually, a reduced availability of credit, and that these market actions will provide an incentive to correct irresponsible fiscal behavior. This paper presents new empirical evidence on market-based fiscal discipline by estimating the relationship between the cost of borrowing and fiscal policy behavior across U.S. states. We find that U.S. states which have followed more prudent fiscal policies are perceived by the market as having lower default risk and are therefore able to reap the benefit of lower borrowing costs.

Effects of the European Economic and Monetary Union (EMU) on Taxation and Interest Spending of National Governments

Effects of the European Economic and Monetary Union (EMU) on Taxation and Interest Spending of National Governments PDF Author: Mr.Francesco P. Mongelli
Publisher: International Monetary Fund
ISBN: 1451951272
Category : Business & Economics
Languages : en
Pages : 37

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Book Description
This paper examines the interest spending and taxation channels through which EMU could affect the public finances. It provides a framework for examining different views on a further narrowing of interest rate differentials. A model of Blanchard and Fischer is amended to analyze the two channels, and empirical evidence on the tax harmonization process is presented. The paper argues that “high-debt” and “high-tax” countries pursuing prudent fiscal policies could benefit the most from EMU: if monetary and widespread fiscal discipline are jointly established, interest rates could decline rapidly, while tax harmonization is likely to be gradual.

Fiscal Discipline in WAEMU

Fiscal Discipline in WAEMU PDF Author: Mr.Ermal Hitaj
Publisher: International Monetary Fund
ISBN: 147552448X
Category : Business & Economics
Languages : en
Pages : 29

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Book Description
This paper gauges the scope for market discipline and the effectiveness of the regional surveillance framework in the West African Economic and Monetary Union (WAEMU). The paper finds that the responsiveness of sovereign bond rates to governments’ fiscal behavior in the regional financial market remains limited. In addition, the paper examines the effectiveness of fiscal rules and institutions in an environment where financial markets fall short of exerting a significant disciplining effect on governments.

The Effects of the European Economic and Monetary Union (EMU)on National Fiscal Sustainability

The Effects of the European Economic and Monetary Union (EMU)on National Fiscal Sustainability PDF Author: Mr.Francesco P. Mongelli
Publisher: International Monetary Fund
ISBN: 145184929X
Category : Business & Economics
Languages : en
Pages : 47

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Book Description
This paper presents a methodology to analyze the responsiveness of fiscal sustainability to the “endogenous fiscal discipline” that will be strengthened by the EMU. This discipline arises in response to the harmonization of tax systems, the loss of control of current and prospective money financing, and the deepening of financial market-based discipline. The model used in this paper is a generalization of Blanchard’s (1984) model, in which the interest rate is determined endogenously. This provides the framework to analyze more features of the linkage between sustainability and endogenous fiscal discipline. This paper also presents a new intratemporal fiscal sustainability index.

Revisiting the Economic Case for Fiscal Union in the Euro Area

Revisiting the Economic Case for Fiscal Union in the Euro Area PDF Author: Mr.Helge Berger
Publisher: International Monetary Fund
ISBN: 1484344030
Category : Business & Economics
Languages : en
Pages : 63

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Book Description
The paper makes an analytical contribution to the revived discussion about the euro area’s institutional setup. After significant progress during the euro crisis, the drive to complete Europe’s Economic and Monetary Union (EMU) had stalled, and the way forward will benefit from an in-depth look at the conceptual issues raised by the evolution and architecture of Europe, and the tradeoffs involved. A thorough look at the underlying economic issues suggests that in the long run, EMU will benefit from progressing along three mutually supporting tracks: introduce more fiscal risk sharing, helping to make the sovereign “no bailout” rule credible; complementary financial sector reforms to delink sovereigns and banks; and more effective rules to discourage moral hazard. This evolution would ensure that financial markets provide incentives for fiscal discipline. Introducing more fiscal union comes with myriad legal, technical, operational, and political problems, raising questions well beyond the remit of economics. But without decisive progress to foster fiscal risk sharing, EMU will continue to face existential risks.

Monetary Discipline as a Substitute for Fiscal Reforms and Market Liberalisations

Monetary Discipline as a Substitute for Fiscal Reforms and Market Liberalisations PDF Author: Alberto Dalmazzo
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Book Description
In an economy with wage-setting unions where the government has gains from redistribution, we analyse the incentive of incumbent politicians to implement monetary discipline (e.g. by joining a monetary union) against the adoption of fiscal reforms, or deregulation in product markets. We show that monetary discipline can be a 'substitute' both for better (i.e. less distortionary) fiscal policies and for deregulation in product markets.

Monetary Union and Fiscal Policy Discipline

Monetary Union and Fiscal Policy Discipline PDF Author: Charles Wyplosz
Publisher:
ISBN:
Category : Fiscal policy
Languages : en
Pages : 72

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Book Description


Toward A Fiscal Union for the Euro Area

Toward A Fiscal Union for the Euro Area PDF Author: Céline Allard
Publisher: International Monetary Fund
ISBN: 1484325184
Category : Business & Economics
Languages : en
Pages : 29

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Book Description
This is on a highly topical issue and addresses a key policy issue for Europe—namely, reinforcing EMU institutional architecture along with the Banking Union. Some proposals have emerged in Europe, and it will be important to put out staff views on this issue. In that context, publication as an SDN is appropriate, given the high profile nature and relevance of the topic—much like the Banking Union paper done a few months ago.

Market Discipline

Market Discipline PDF Author: Mr.Timothy D. Lane
Publisher: International Monetary Fund
ISBN: 1451846150
Category : Business & Economics
Languages : en
Pages : 50

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Book Description
Under what circumstances can market forces prevent unsustainable borrowing? Effective market discipline requires that capital markets be open, that; information on the borrower’s existing liabilities be readily available, that no bailout be anticipated, and that the borrower respond to market signals. This paper explores the implications of these conditions, and reviews some relevant empirical evidence.