Fiscal Devaluation in a Monetary Union
Author | : Philipp Engler |
Publisher | : International Monetary Fund |
Total Pages | : 33 |
Release | : 2014-10-30 |
ISBN-10 | : 9781498336352 |
ISBN-13 | : 1498336353 |
Rating | : 4/5 (52 Downloads) |
Download or read book Fiscal Devaluation in a Monetary Union written by Philipp Engler and published by International Monetary Fund. This book was released on 2014-10-30 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a DSGE model calibrated to the euro area, we analyze the international effects of a fiscal devaluation (FD) implemented as a revenue-neutral shift from employer's social contributions to the Value Added Tax. We find that a FD in ‘Southern European countries’ has a strong positive effect on output, but mild effects on the trade balance and the real exchange rate. Since the benefits of a FD are small relative to the divergence in competitiveness, it is best addressed through structural reforms.