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IR08-012_Claeys-Ramos.pdf (152.29 KB)

Tipus de document

Document de treball

Data de publicació

2008

Llicència de publicació

cc-by-nc-nd, (c) Claeys et al., 2008
Si us plau utilitzeu sempre aquest identificador per citar o enllaçar aquest document: https://hdl.handle.net/2445/62327

Testing the FTPL across government tiers

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Resum

Control on regional government budgets is important in a monetary union as lower tiers of government have fewer incentives to consolidate debt. According to the Fiscal Theory of the Price Level; unsustainable non-Ricardian fiscal policies eventually force monetary policy to adjust. Hence, uncoordinated and non-regulated regional fiscal policies would therefore threaten price stability for the monetary union as a whole. However, the union central bank is not without defense. A federal government that internalises the spillover effect of non-Ricardian fiscal policies on the price level can offset non-Ricardian regional fiscal policies. A federal government, which taxes and transfers resources between regions, may compensate for unsustainable regional fiscal policies so as to keep fiscal policy Ricardian on aggregate. Following Canzoneri et al. (2001), we test the validity of the Fiscal Theory of the Price Level for both federal and regional governments in Germany. We find evidence of a spillover effect of unsustainable policies on the price level for other Länder. However, the German federal government offsets this effect on the price level by running Ricardian policies. These results have implications for the regulation of fiscal policies in the EMU.

Matèries

Desenvolupament sostenible, Política fiscal, Federalisme, Descentralització administrativa

Matèries (anglès)

Sustainable development, Fiscal policy, Federalism, Decentralization in government

Citació

Col·leccions

Documents de treball (Institut de Recerca en Economia Aplicada Regional i Pública (IREA))
Documents de treball / Informes (Econometria, Estadística i Economia Aplicada)

Citació

CLAEYS, Peter, RAMOS LOBO, Raúl and SURIÑACH CARALT, Jordi. Testing the FTPL across government tiers. IREA – Working Papers. 2008. Vol.  IR08/12. ISSN 2014-1254. [consulted: 15 of August of 2026]. Available at: https://hdl.handle.net/2445/62327

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