Fiscal Devaluation as an Economic Policy Tool
DOI:
https://doi.org/10.15678/ZNUEK.2015.0945.0908Keywords:
exchange rate, internal devaluation, fiscal policy, international competitivenessAbstract
Growing divergence of competitiveness, followed by the appearance of huge current account imbalances among member countries of the Euro zone, have stimulated research for corrective tools beyond the exchange rate. Fiscal devaluation is one such alternative, which consists in the simultaneous shifting of output towards exports and expenditure towards domestic goods by means of a balanced change in the structure of fiscal incidence. Fiscal devaluation is discussed in a broader context of different forms of internal devaluation. The paper reviews recent literature on potential benefits and drawbacks of this tool and conditions of its effectiveness, for countries both in an outside of the currency union. The author concludes that Poland does not fulfil the majority of these conditions. The exchange rate of the country’s currency varies considerably, the ratio of minimal wage to average wage is not particularly high as compared with other EU countries and the range of indexation of public transfers to inflation is relatively wide. In these conditions fiscal devaluation would not work effectively as a tool of external equilibrium maintenance.Downloads
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