Will Fiscal Policy Be Effective Under EMU?

Author/Editor:

M. Cangiano ; Eric Mottu

Publication Date:

December 1, 1998

Electronic Access:

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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:

European Economic and Monetary Union does not envisage creating a central fiscal authority. Monetary and exchange rate policies will be centralized, but fiscal policy will remain a national responsibility, in line with the subsidiarity principle. This paper argues that monetary union will generate pressures for closer economic integration than currently envisaged. Although not a necessity, a more active central role could then be justified on the grounds of allocative efficiency, redistribution, and stabilization. While in the short term enhanced policy coordination may address those pressures satisfactorily, as economic integration proceeds, the case for a central fiscal authority may become stronger.

Series:

Working Paper No. 98/176

Subject:

English

Publication Date:

December 1, 1998

ISBN/ISSN:

9781451975550/1018-5941

Stock No:

WPIEA1761998

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

32

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