The Effects of the European Economic and Monetary Union (EMU)on National Fiscal Sustainability

Francesco Mongelli

No 1996/072, IMF Working Papers from International Monetary Fund

Abstract: This paper presents a methodology to analyze the responsiveness of fiscal sustainability to the “endogenous fiscal discipline” that will be strengthened by the EMU. This discipline arises in response to the harmonization of tax systems, the loss of control of current and prospective money financing, and the deepening of financial market-based discipline. The model used in this paper is a generalization of Blanchard’s (1984) model, in which the interest rate is determined endogenously. This provides the framework to analyze more features of the linkage between sustainability and endogenous fiscal discipline. This paper also presents a new intratemporal fiscal sustainability index.

Keywords: WP; risk premium; interest rate; EU member; debt country; devaluation risk premium; EU aritnm; EMU member; EMU candidate; risk premium function; structure of the EMU; single currency; fiscal sustainability frontier; EU directive; debt repudiation; Fiscal sustainability; Fiscal stance; Government debt management; Budget planning and preparation; Europe (search for similar items in EconPapers)
Pages: 46
Date: 1996-07-01
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Citations: View citations in EconPapers (7)

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Journal Article: The Effects of the European Economic and Monetary Union (EMU) on National Fiscal Sustainability (1999)
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