Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/30115 
Year of Publication: 
2009
Series/Report no.: 
MAGKS Joint Discussion Paper Series in Economics No. 2009,13
Publisher: 
Philipps-University Marburg, Faculty of Business Administration and Economics, Marburg
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

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