This note explores the link between the effort level to strengthen institutional quality and the nature of the fiscal policy game among interdependent economies plagued by corruption. Every country has a lower incentive to improve public governance when the effort made abroad to remedy...

Corruption can enhance welfare in two complementary ways in a dynamic time inconsistency model: first, by mitigating the inflation bias of discretionary monetary policy; second, by reducing the loss due to the suboptimal distribution of distortions associated with public debt accumulation. The...