Fed paper studies impact of fiscal reform within a monetary union

federal reserve

A discussion paper, published by the Federal Reserve on October 5, finds a shift from direct to indirect taxes in one member state of a monetary union is unlikely to affect another.

The authors, Anna Lipińska and Leopold von Thadden, say a tax shift – a ‘fiscal devaluation reform' – in one country in their two-country model of a monetary union will only affect the other if they are perfectly integrated.

In such a situation, the shift would produce "small non-negligible" effects on output and

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