Fiscal policy and regional inflation in a currency union

• 成果类型: Article
• 署名作者: Duarte, Margarida; Wolman, Alexander L.
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Richmond; University of Toronto
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2007.07.002
• 发表日期: 2008
• 页码: 384-401
• 关键词: Currency union; inflation differentials; fiscal policy

摘要

Substantial attention has been devoted to inflation differentials within the European Monetary Union, including suggestions that inflation differentials area policy issue for national governments. This paper investigates the ability of a region participating in a currency union to affect its inflation differential with respect to the union through fiscal policy. In a two-region general equilibrium model with traded and nontraded goods, lowering the labor income tax rate in response to positive inflation differentials succeeds in compressing inflation differentials. Such policies can lead to higher volatility of domestic inflation while leaving the volatility of real output roughly unchanged. Regional fiscal policies also have spill-over effects on the volatility of union-wide and foreign inflation in our model. Published by Elsevier B.V.