Uncertainty and fiscal policy in an asymmetric monetary union

Carsten Hefeker and Blandine Zimmer ()

No 200913, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: We examine monetary and fiscal interactions in a monetary union model with uncertainty due to imperfect central bank transparency. It is first shown that monetary uncertainty discourages excessive taxation and may thus reduce average inflation and output distortions. However, as countries enter the monetary union, this tax-restraining effect of uncertainty is mitigated. The monetary union may hence lead to higher fiscal distortions in some member countries, depending on governments’ spending targets and on the change in the degree of uncertainty implied by common monetary policy.

Keywords: Monetary union; fiscal policy; transparency of monetary policy; asymmetries (search for similar items in EconPapers)
JEL-codes: E58 E63 F36 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (19)

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https://www.uni-marburg.de/en/fb02/research-groups ... /13-2009_hefeker.pdf First version, 2009 (application/pdf)

Related works:
Journal Article: Uncertainty and Fiscal Policy in an Asymmetric Monetary Union (2011)
Working Paper: Uncertainty and Fiscal Policy in an Asymmetric Monetary Union (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:200913

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