Uncertainty and Fiscal Policy in an Asymmetric Monetary Union PDF Download
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Author: Carsten Hefeker
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
The paper examines the monetary-fiscal interactions in a monetary union model with uncertainty due to imperfect central bank transparency. We first show that monetary uncertainty disciplines fiscal policymakers and thereby reduces taxes, average inflation and output distortions. However, as more members enter the monetary union, the fiscal disciplining effect of uncertainty is mitigated. As a consequence, monetary union enlargement may lead to a more aggressive fiscal stance in some member countries, depending on their relative economic and political weights, on their government's spending target, and on the change in the degree of uncertainty that they experience with the enlargement.
Author: Carsten Hefeker
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
The paper examines the monetary-fiscal interactions in a monetary union model with uncertainty due to imperfect central bank transparency. We first show that monetary uncertainty disciplines fiscal policymakers and thereby reduces taxes, average inflation and output distortions. However, as more members enter the monetary union, the fiscal disciplining effect of uncertainty is mitigated. As a consequence, monetary union enlargement may lead to a more aggressive fiscal stance in some member countries, depending on their relative economic and political weights, on their government's spending target, and on the change in the degree of uncertainty that they experience with the enlargement.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Carsten Hefeker
Publisher:
ISBN:
Category :
Languages : en
Pages : 19
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Author: Volker Clausen
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Farid Jimmy Boumediene
Publisher:
ISBN:
Category : Fiscal policy
Languages : en
Pages : 480
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Author: Wouter van der Wielen
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ISBN:
Category :
Languages : en
Pages : 28
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Author: Luigi Marattin
Publisher:
ISBN:
Category :
Languages : en
Pages : 32
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We analyze fiscal rules within a Monetary Union in the presence of (i) asymmetric information on member states' potential output and (ii) bail-out among member states. The first-best deficit is contingent on the cycle, that is, on member states' output gap. In the presence of asymmetric information and bailout, the first-best deficit is not implementable. Bail-out lowers the scope for signalling (discrimination) by member states (lenders) and induces overborrowing by member states characterized by a low output gap. The Monetary Union can design a mechanism such that a member state with a smaller negative output gap runs an optimal budget deficit upon receiving a transfer form the Union. We show that, this 'cyclically-contingent' fiscal framework Pareto dominates the 'cyclically-adjusted' fiscal rule currently enforced by the European Monetary Union. Our model can then account for a situation where both asymmetric information over cyclical positions and the presence of bail-out among member states does not induce borrowing distortions.
Author: Luigi Marattin
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
We analyze fiscal rules within a Monetary Union in the presence of (i) asymmetric information about member states' potential output and, therefore, output gap and (ii) bail-out among member states. In our framework, bail-out lowers the scope for signalling (discrimination) by member states (lenders). In the presence of asymmetric information, bail-out and national governments' shortsightedness make the first-best fiscal rule non-implementable as member states are tempted to run excessively high deficits.The Monetary Union designs a mechanism such that member states with high output gap (i.e., in a recession) run higher budget deficits by making an ex-post transfer to the Union. We find that the first-best deficit is contingent on the cycle - i.e., on the member state's output gap - and, all else equal, can be implemented provided the member states' ability to repay its own debt upon the realization of a bad shock is sufficiently high. A downward distortion in the deficit run by a member state during an expansion is otherwise introduced. Finally, the Monetary Union cannot discriminate among types of borrowers when national governments are excessively shortsighted.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1451844239
Category : Business & Economics
Languages : en
Pages : 33
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Book Description
Recently, monetary authorities have increasingly focused on implementing policies to ensure price stability and strengthen central bank independence. Simultaneously, in the fiscal area, market development has allowed public debt managers to focus more on cost minimization. This “divorce” of monetary and debt management functions in no way lessens the need for effective coordination of monetary and fiscal policy if overall economic performance is to be optimized and maintained in the long term. This paper analyzes these issues based on a review of the relevant literature and of country experiences from an institutional and operational perspective.
Author: Volker Clausen
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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