Labor Tax Reforms, Cross-Country Coordination, and the Monetary Policy Stance in the Euro Area: A Structural Model-Based Approach
Matija Lozej and
Massimiliano Pisani ()
Additional contact information
Pascal Jacquinot: European Central Bank
International Journal of Central Banking, 2018, vol. 14, issue 3, 65-140
We evaluate the effects of permanently reducing labor tax rates in the euro area (EA) by simulating a large-scale openeconomy dynamic general equilibrium model. The model features the EA as a monetary union, split into two regions (home and the rest of the EA, or REA), the United States, and the rest of the world, region-specific labor markets with search and matching frictions, and public employment. Our results are as follows. First, a permanent reduction in labor tax rates in the home region would have stimulating effects on domestic economic activity and employment. Second, reducing labor tax rates simultaneously in both home and REA would have additional expansionary effects on the home region. Third, the short-run macroeconomic effectiveness of the EAwide tax reduction is enhanced if the EA monetary policy is accommodating.
JEL-codes: E24 E32 E52 E62 F45 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed
Downloads: (external link)
Working Paper: Labour tax reforms, cross-country coordination and the monetary policy stance in the euro area: A structural model-based approach (2018)
Working Paper: Labour tax reforms, cross-country coordination and the monetary policy stance in the euro area: a structural model-based approach (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2018:q:2:a:2
Access Statistics for this article
International Journal of Central Banking is currently edited by Loretta J. Mester
More articles in International Journal of Central Banking from International Journal of Central Banking
Bibliographic data for series maintained by Bank for International Settlements ().