DSpace Repository

For a stable monetary policy and tax competition in Euroland

Show simple item record

dc.creator Boss, Alfred
dc.creator Gern, Klaus-Jürgen
dc.creator Meier, Klaus-Jürgen
dc.creator Scheide, Joachim
dc.creator Schlie, Markus
dc.date 1999
dc.date.accessioned 2013-10-16T06:17:49Z
dc.date.available 2013-10-16T06:17:49Z
dc.date.issued 2013-10-16
dc.identifier urn:isbn:3894561874
dc.identifier http://hdl.handle.net/10419/2237
dc.identifier ppn:267505000
dc.identifier RePEc:zbw:ifwkdp:338
dc.identifier.uri http://koha.mediu.edu.my:8181/xmlui/handle/10419/2237
dc.description Since the fall of last year, EMU countries have experienced a slowdown in economic activity triggered by a deceleration of exports. The expansion of internal demand has been more or less intact due to low interest rates and higher terms of trade. Consumer confidence has continued to rise and business confidence seems to have stabilized in early 1999. Economic activity in Euroland will gain momentum again in the course of 1999, mainly driven by domestic demand. The increase in real GDP will amount to 2 percent in 1999 and 2.7 percent in the year 2000. Monetary conditions are currently very favorable and will support the upswing. The three-month money market rate fell to 3.1 % following the concerted reduction of central banks' key interest rates in December 1998. Long-term interest rates are extremely low; corrected for inflation, the rate for Euroland is lower than the long-term average for Germany. In recent months, the growth rate of M3 has been somewhat higher than the reference value announced by the ECB (4.5 percent); narrow money has expanded twice as fast as M3. In addition, the euro has devalued considerably against the US dollar since the beginning of this year. Given the expectation that the slowdown in the economy is only of temporary nature, the ECB will not loosen its policy further but keep its key interest rate at the current low level for the rest of this year. The ECB decided to follow a medium-term strategy. Against this background, the current weakness in Euroland does not imply a need for action. Low inflation is also no reason to cut interest rates because consumer prices have been dampened by special factors, in particular the weakness of raw material prices, and not by a tight monetary policy. If interest rates were lowered in response to this transitory change, they would have to be raised again as soon as this effect fades away. Such a stop-and-go policy should be avoided. Likewise, the recent weakness of the euro against major currencies does not suggest that interest rates should be raised. For very good reasons, the ECB—as well as the American Federal Reserve Board—does not follow a target for exchange rates. According to the Stability and Growth Programs published by the governments, budget deficits in relation to GDP are projected to decline from 2.3 percent in 1998 to 0.9 percent in the year 2002 in Euroland. As the Stability and Growth Pact calls for a balanced budget or even a surplus over the medium term, fiscal policy is, in general, not yet on a course compatible with the intentions of the Maastricht Treaty. Only in smaller countries fiscal policy is making progress, while consolidation in larger member countries is not sufficient. It has often been argued that it is necessary to harmonize VAT rates and particularly capital income taxation in the EU in order to prevent a "race to the bottom", otherwise it would be impossible to supply an adequate level of public goods and to finance the welfare state. However, the development of capital income tax rates in the EU and in other industrialized countries does not provide evidence of a race to the bottom. But even if tax competition should become fiercer, there are still arguments in favor of competition: If tax rates are cut in a process of competition, government expenditures will have to decline with the result that inefficiencies in the public sector will be reduced. Given the high levels of government expenditures in most of the EU countries, there seems to be no risk that governments would be unable to fulfill their specific functions. In addition, tax competition might help to find better tax systems, and every country could learn from the experiences of other countries. In contrast, tax harmonization would probably lead to higher taxes in the EU.
dc.language eng
dc.publisher Kiel Institute for the World Economy (IfW) Kiel
dc.relation Kieler Diskussionsbeiträge 338
dc.rights http://www.econstor.eu/dspace/Nutzungsbedingungen
dc.subject ddc:330
dc.subject Konjunkturprognose
dc.subject Geldpolitik
dc.subject Finanzpolitik
dc.subject EU-Steuerrecht
dc.subject Steuerwettbewerb
dc.subject EU-Staaten
dc.title For a stable monetary policy and tax competition in Euroland
dc.type doc-type:workingPaper

Files in this item

Files Size Format View

There are no files associated with this item.

This item appears in the following Collection(s)

Show simple item record

Search DSpace

Advanced Search


My Account