Fiscal devaluation and fiscal consolidation the vat in troubled times by Ruud de Mooij and Michael Keen published by NBER (3/2012). “This paper focuses on two core tax design issues that arise in addressing current fiscal challenges. It first explores the idea, prominent in troubled Eurozone countries, of a ‘fiscal devaluation:’ shifting from social contributions to the VAT as a way to mimic a nominal devaluation. Empirical evidence is presented which suggests that in Eurozone countries this may indeed improve the trade balance quite sizably in the short-rum, though, as theory predicts, the effects eventually disappear…”
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