Fiscal Constraints of a Fixed Exchange Rate Regime
The paper considers whether the implementation of a fixed exchange rate regime requires or implies binding constraints on fiscal policy. The main conclusions are that, from a country perspective, the effective constraint is on the degree of monetary financing, which bears an uncertain relationship t...
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| Format: | eBook |
| Language: | English |
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Washington, D.C.
International Monetary Fund
1989
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| Series: | IMF Working Papers
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| Collection: | International Monetary Fund - Collection details see MPG.ReNa |
| Summary: | The paper considers whether the implementation of a fixed exchange rate regime requires or implies binding constraints on fiscal policy. The main conclusions are that, from a country perspective, the effective constraint is on the degree of monetary financing, which bears an uncertain relationship to the size of the budget deficit; that, from a systemic perspective, the financial stability of the currency area can be ensured by making the monetary and fiscal authorities independent of one another; and that the case for coordination of fiscal policies—whatever its merits—is not enhanced by the creation of a fixed exchange rate regime |
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| Physical Description: | 26 pages |
| ISBN: | 9781451946680 |