Effects of the European Economic and Monetary Union (EMU) on Taxation and Interest Spending of National Governments
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Summary:
This paper examines the interest spending and taxation channels through which EMU could affect the public finances. It provides a framework for examining different views on a further narrowing of interest rate differentials. A model of Blanchard and Fischer is amended to analyze the two channels, and empirical evidence on the tax harmonization process is presented. The paper argues that “high-debt” and “high-tax” countries pursuing prudent fiscal policies could benefit the most from EMU: if monetary and widespread fiscal discipline are jointly established, interest rates could decline rapidly, while tax harmonization is likely to be gradual.
Series:
Working Paper No. 1997/093
Subject:
Fiscal policy Government asset and liability management National accounts Public debt Public financial management (PFM) Return on investment Tax harmonization Taxes
English
Publication Date:
July 1, 1997
ISBN/ISSN:
9781451951271/1018-5941
Stock No:
WPIEA0931997
Pages:
36
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