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Title:EMU and fiscal discipline: the end of the depreciation threat PDF Logo
Authors:Heinemann, Friedrich
Issue Date:1998
Series/Report no.:ZEW Discussion Papers 98-30
Abstract:Are the characteristics of the exchange rate regime relevant for the degree of fiscal discipline? What are the conclusions for fiscal behavior in Europe after the transition to EMU? These are the central questions that are analyzed in this paper from a theoretical point of view. After a general discussion of these issues, the optimization process of fiscal agents is analyzed in the context of a model based on the monetary approach to the exchange rate. The model conclusion is that monetary union leads to more fiscal discipline for high debt countries that used to have a benign neglect stance on the exchange rate. Contrasting to that, low debt countries that used to pay much attention to the exchange rate in the past will behave less disciplined in the future.
Subjects:EMU
Exchange Rate Regime
Fiscal Discipline
Globalization
Public Debt
JEL:H60
F31
E61
Document Type:Working Paper
Appears in Collections:ZEW Discussion Papers
Publikationen von Forscherinnen und Forschern des ZEW

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