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Monetary Discipline as a Substitute for Fiscal Reforms and Market Liberalisations
Author(s) -
Dalmazzo Alberto
Publication year - 2014
Publication title -
economic notes
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.274
H-Index - 19
eISSN - 1468-0300
pISSN - 0391-5026
DOI - 10.1111/ecno.12018
Subject(s) - redistribution (election) , deregulation , economics , incentive , product market , wage , monetary economics , fiscal policy , government (linguistics) , monetary policy , macroeconomics , market economy , linguistics , philosophy , politics , political science , law
Abstract In an economy with wage‐setting unions where the government has gains from redistribution, we analyse the incentive of incumbent politicians to implement monetary discipline (e.g. by joining a monetary union) against the adoption of fiscal reforms, or deregulation in product markets. We show that monetary discipline can be a ‘substitute’ both for better (i.e. less distortionary) fiscal policies and for deregulation in product markets.