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

38 Pages Posted: 15 Feb 2006

See all articles by Carlos Végh

Carlos Végh

affiliation not provided to SSRN

Pablo E. Guidotti

Ministry Of Economy, Public Works and Services, Argentina

Date Written: May 8, 1989

Abstract

This paper analyzes, in a public finance context, how the optimal use of the inflation and the consumption tax is affected by incorporating into the model constraints on policy decisions that are likely to develop in the context of the EMS by 1992. Two main questions are addressed: first, how the constraint of having to share a common inflation tax, in order to preserve fixed-exchange rates, influences the optimal policy decisions concerning the inflation tax; secondly, how the harmonization of consumption taxes affects the spread between national inflation rates, and hence the probability of having to resort to realignments.

JEL Classification: 430, 320

Suggested Citation

Végh, Carlos and Guidotti, Pablo E., Optimal Taxation Policies in the EMS: A Two-Country Model of Public Finance (May 8, 1989). IMF Working Paper No. 89/40, Available at SSRN: https://ssrn.com/abstract=884760

Carlos Végh (Contact Author)

affiliation not provided to SSRN

No Address Available

Pablo E. Guidotti

Ministry Of Economy, Public Works and Services, Argentina ( email )

Hipolito Yrigoyen 250-5th Floor-Room 506
Buenos Aires, 1310
Argentina

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