| Author (Person) | Vogel, Lukas |
|---|---|
| Author (Corporate) | European Commission: DG Economic and Financial Affairs |
| Publisher | Publications Office of the European Union |
| Series Title | European Economy: Discussion Papers |
| Series Details | Number 22 |
| Publication Date | 22/12/2015 |
| ISBN | 978-92-79-48700-2 |
| ISSN | 2443-8022 |
| EC | KC-BD-15-022-EN-N |
| Content Type | Research Paper |
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Summary: The paper uses a small open economy general-equilibrium model to compare fiscal and nominal exchange rate devaluation with respect to their impact on economic activity and the current account. In particular, it investigates the extent to which fiscal devaluation mimics nominal exchange rate adjustment and mitigates the output loss associated with demand rebalancing and external adjustment. The results suggest that internal or external devaluation can support external adjustment and mitigate its impact on economic activity, without leading to lasting adjustment themselves. However, the quantitative contribution of a tax shift from labour to consumption, the standard example of fiscal devaluation, remains moderate. |
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| Source Link |
Link to Main Source
https://ec.europa.eu/info/publications/economy-finance/stabilisation-and-rebalancing-fiscal-or-monetary-devaluation-model-based-comparison_en
Alternative sources
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| Subject Categories | Economic and Financial Affairs |
| Subject Tags | Fiscal Policy |
| Keywords | Fiscal Devaluation |
| Countries / Regions | Europe |
