10.18452/4618
Brede, Maren
Budget-neutral fiscal rulestargetinginflation differentials
Humboldt-Universität zu Berlin, Wirtschaftswissenschaftliche Fakultät
2016
monetary union
Inflation differentials
fiscal policy
balanced-budget policy
310 Sammlungen allgemeiner Statistiken
330 Wirtschaft
Humboldt-Universität zu Berlin
Humboldt-Universität zu Berlin
2017-06-16
2017-06-16
2017-02-02
2016-02-22
2016-02-22
en
1860-5664
http://edoc.hu-berlin.de/18452/5270
urn:nbn:de:kobv:11-100243390
2195055-6
In light of persistent in ation dispersion and rising debt levels in the EMU, this paper investigates the welfare implications of budget-neutral fiscal policies that counteract in ation differentials. In a two-country DSGE model of a monetary union with traded and non-traded goods a national fiscal authority is able to reduce welfare losses arising from asymmetric shocks by following a Taylor-type rule for consumption taxes while using labour income taxes to balance its budget. Under technology and government spending shocks welfare losses can be reduced by up to 15%.