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Issue Q4 2012  
Tax Reform and Coordination in a Currency Union  
Benjamin Carton
We propose a two-country DSGE model to analyze short-term and long-term impact of a modification of consumption and labor tax rate in one country in a currency union. The model embodies the fact that firms differ in their pricing behavior after a VAT tax increase. Due to the common monetary policy, national tax policies have large spill-overs on the rest of the currency union. Furthermore, a fiscal devaluation is different from a nominal devaluation due to the common monetary policy. Abstract

Fiscal Policy ; Monetary Policy ; DSGE ; Value added Tax ; Monetary Union ; Keywords
F56 ; C12 ; JEL classification
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