Distortionary Taxation and Central Bank Design in a Monetary Union

  1. Juan Cristóbal Campoy 1
  2. Juan Carlos Negrete 1
  1. 1 Universidad de Murcia
    info

    Universidad de Murcia

    Murcia, España

    ROR https://ror.org/03p3aeb86

Zeitschrift:
Hacienda Pública Española / Review of Public Economics

ISSN: 0210-1173

Datum der Publikation: 2017

Nummer: 222

Seiten: 65-90

Art: Artikel

DOI: 10.7866/HPE-RPE.17.3.3 DIALNET GOOGLE SCHOLAR lock_openOpen Access editor

Andere Publikationen in: Hacienda Pública Española / Review of Public Economics

Ziele für nachhaltige Entwicklung

Zusammenfassung

We consider a monetary union where distortionary taxation leads to the classical inflation bias in discretionary monetary policy. We show that a more generous welfare state requires a more conservative central bank. This result rationalizes the perception that the European Central Bank is more focused than the U.S. Federal Reserve on putting a lid on inflation but less worried about deflation. Besides, when an economic crisis increases the welfare state costs for countries in the periphery of the union, making the common central bank more conservative will improve welfare not only in the core countries but also in the periphery

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Financial support from the Spanish Ministry of Economy and Competitiveness through MEC/FEDER grant ECO2010-21624 is also gratefully acknowledged

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