The Effects of the European Economic and Monetary Union (EMU)on National Fiscal Sustainability
July 1, 1996
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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
Pages:
46
Volume:
1996
DOI:
Issue:
072
Series:
Working Paper No. 1996/072
Stock No:
WPIEA0721996
ISBN:
9781451849295
ISSN:
1018-5941
