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Title:Uncertainty and fiscal policy in an asymmetric monetary union PDF Logo
Authors:Hefeker, Carsten
Zimmer, Blandine
Issue Date:2009
Series/Report no.:Joint discussion paper series in economics 2009,13
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.
Subjects:Monetary union
fiscal policy
transparency of monetary policy
asymmetries.
JEL:E58
E63
F36
Document Type:Working Paper
Appears in Collections:MAGKS Joint Discussion Paper Series in Economics, Universität Marburg

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