Please use this identifier to cite or link to this item:
Coenen, Günter
McAdam, Peter
Straub, Roland
Year of Publication: 
Series/Report no.: 
ECB Working Paper 747
In this paper, we employ a calibrated two-country version of the New Area-Wide Model (NAWM) currently under development at the European Central Bank to examine the potential benefits and spillovers of reducing labour-market distortions caused by euro area tax structures. Our analysis shows that lowering tax distortions to levels prevailing in the United States would result in an increase in hours worked and output by more than 10 percent. At the same time, tax reductions would have positive spillovers to the euro area’s trade partners, bolstering the case for tax reforms from a global perspective. Finally, we illustrate that, in the presence of heterogeneous households, distributional effects may be of importance when gauging the impact of tax reforms.
DSGE modelling
euro area
Fiscal Policy
limited asset-market participation
tax reform
Document Type: 
Working Paper

Files in This Item:
889.12 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.