Do Monetary Handcuffs Restrain Leviathan? Fiscal Policy in Extreme Exchange Rate Regimes

Andrew Rose and Fatás, Antonio
Authors registered in the RePEc Author Service: Antonio Fatas

No 2692, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper is an empirical study of fiscal policy in countries with extreme monetary regimes. We study members of multilateral currency unions, dollarized countries that officially use the money of another country, and countries using currency boards. We find that belonging to an international common currency area is not associated with fiscal discipline; if anything, spending and taxes are higher inside currency unions. This effect is especially pronounced for dollarized countries that unilaterally adopt the currency of another country. Currency boards are associated with fiscal restraint.

Keywords: Empirical; Panel; Government; Spending; Tax; Revenue; Budget (search for similar items in EconPapers)
JEL-codes: E60 F30 F33 (search for similar items in EconPapers)
Date: 2001-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

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