This paper studies the government�s public investment decision problem. Above some critical value of political instability, no investment is optimal. The result can also be interpreted as an alternative explanation for some governments� reluctance in fighting corruption.

By using a multi-country simulation model this paper analyzes the qualitative effects of joining a monetary union. The transition to EMU (European Monetary Union) is shown to produce interest and exchange rate changes with substantial and countervailing effects on the real economy which can be...

This paper presents an intertemporal political economy model of public finance relevant for developing and transition countries where there is inherent political instability. As in Cukierman, et al. (1992), it is shown that political instability causes myopic behaviour by a rational government...

This paper presents an intertemporal political economy model of sustainable public finance relevant for many developing or transition countries: instability is inherent to the political structure and foreign debt is a crucial source of government revenue. The main results are: First, political...

By using a multi-country simulation model this paper analyses the qualitative effects both of contractionary fiscal policies and of joining a monetary union. It is shown that - under certain macroeconomic conditions - both policy changes should happen at the same time. Given that these...