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Effects of the European Economic and Monetary Union (EMU) on Taxation and Interest Spending of National Governments

Author

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  • Francesco P Mongelli

Abstract

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.

Suggested Citation

  • Francesco P Mongelli, 1997. "Effects of the European Economic and Monetary Union (EMU) on Taxation and Interest Spending of National Governments," IMF Working Papers 97/93, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:97/93
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    Cited by:

    1. repec:ebl:ecbull:v:8:y:2007:i:4:p:1-7 is not listed on IDEAS
    2. Ismael Sanz & Francisco Javier Velázquez, 2002. "Determinants of the Composition of Government Expenditure by Functions," European Economy Group Working Papers 13, European Economy Group.
    3. Heinemann, Friedrich & Winschel, Viktor, 2001. "Public deficits and borrowing costs: the missing half of market discipline," ZEW Discussion Papers 01-16, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Heinemann, Friedrich, 1998. "EMU and fiscal discipline: the end of the depreciation threat," ZEW Discussion Papers 98-30, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Heinemann, Friedrich, 1999. "Does globalization restrict budgetary autonomy? A multidimensional approach," ZEW Discussion Papers 99-29, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. Benczes, István, 1999. "Fiskális politika a Gazdasági és Monetáris Unióban
      [Fiscal policy in the European Economic and Monetary Union]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 362-379.

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