‘Fiscal devaluation’ not enough to solve competitiveness problems, IMF paper finds
Such action may be useful as part of a wider structural reform package
A ‘fiscal devaluation' is of limited use to countries in a monetary union looking to boost their competitiveness, a paper published yesterday by the IMF has found.
Authors Philipp Engler, Giovanni Ganelli, Juha Tervala and Simon Voigts take the eurozone as their starting point, calibrating a DSGE model to represent ‘central-northern' countries and ‘southern countries'. Their paper, Fiscal devaluation in a monetary union, finds such devaluations have a relatively muted effect on output.
A fiscal
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