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Fiscal Devaluation in a Monetary Union

Using a DSGE model calibrated to the euro area, we analyze the international effects of a fiscal devaluation (FD) implemented as a revenue-neutral shift from employer's social contributions to the Value Added Tax. We find that a FD in ‘Southern European countries’ has a strong positive effect o...

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Bibliographic Details
Main Author: Engler, Philipp
Other Authors: Ganelli, Giovanni, Tervala, Juha, Voigts, Simon
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2014
Series:IMF Working Papers
Subjects:
Wealth
Economics
Balance Of Trade
Public Finance & Taxation
Taxes
Fiscal Policy
Open Economy Macroeconomics
Exports And Imports
National Accounts
Cycles
Business Taxes And Subsidies
International Trade
Personal Finance -taxation
Macroeconomics
Tax Administration And Procedure
Taxation
Personal Income And Other Nonbusiness Taxes And Subsidies
Value-added Tax
Spendings Tax
Income Tax
Fiscal Devaluation
Short-term Capital Movements
Saving
Current Account Adjustment
Trade Balance
International Economics
Taxation, Subsidies, And Revenue: General
Tax Policy
Consumption
Macroeconomics: Consumption
Business Fluctuations
Empirical Studies Of Trade
Personal Income Tax
Portugal
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:Using a DSGE model calibrated to the euro area, we analyze the international effects of a fiscal devaluation (FD) implemented as a revenue-neutral shift from employer's social contributions to the Value Added Tax. We find that a FD in ‘Southern European countries’ has a strong positive effect on output, but mild effects on the trade balance and the real exchange rate. Since the benefits of a FD are small relative to the divergence in competitiveness, it is best addressed through structural reforms
Physical Description:33 pages
ISBN:9781484312131

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