The Effects of the European Economic and Monetary Union (EMU)on National Fiscal Sustainability

July 1, 1996

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Francesco P Mongelli. The Effects of the European Economic and Monetary Union (EMU)on National Fiscal Sustainability, (USA: International Monetary Fund, 1996) accessed December 25, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper presents a methodology to analyze the responsiveness of fiscal sustainability to the “endogenous fiscal discipline” that will be strengthened by the EMU. This discipline arises in response to the harmonization of tax systems, the loss of control of current and prospective money financing, and the deepening of financial market-based discipline. The model used in this paper is a generalization of Blanchard’s (1984) model, in which the interest rate is determined endogenously. This provides the framework to analyze more features of the linkage between sustainability and endogenous fiscal discipline. This paper also presents a new intratemporal fiscal sustainability index.

Subject: Budget planning and preparation, Fiscal policy, Fiscal stance, Fiscal sustainability, Government debt management, Public debt, Public financial management (PFM)

Keywords: Budget planning and preparation, Debt country, Debt repudiation, Devaluation risk premium, EMU candidate, EMU member, EU aritnm, EU directive, EU member, Europe, Fiscal stance, Fiscal sustainability, Fiscal sustainability frontier, Government debt management, Interest rate, Risk premium, Risk premium function, Single currency, Structure of the EMU, WP

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1996/072
Stock No:

WPIEA0721996
ISBN:

9781451849295
ISSN:

1018-5941

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