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Optimal Taxation Policies in the EMS: A Two-Country Model of Public Finance

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  • Carlos A. Végh

    (International Monetary Fund)

  • Pablo E. Guidotti

    (International Monetary Fund)

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    Abstract

    Constraints on policy variables that are likely to develop in the context of the European Monetary System by 1992 are incorporated into a public finance framework. The effects of such constraints on the optimal use of the inflation and consumption tax are analyzed. Two questions are addressed: how the constraint of a common inflation rate, necessary to preserve fixed exchange rates, influences optimal policy decisions concerning the inflation tax; and how the harmonization of consumption taxes affects the spread between national inflation rates.

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.

    Volume (Year): 37 (1990)
    Issue (Month): 2 (June)
    Pages: 311-337

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    Handle: RePEc:pal:imfstp:v:37:y:1990:i:2:p:311-337

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    Cited by:
    1. Tori, Cynthia Royal, 1997. "What is the optimal size of a monetary union?," International Review of Economics & Finance, Elsevier, vol. 6(1), pages 57-66.

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