Recently, Svensson (1997) has shown that a combination of state-contingent inflation targeting and central banker "conservatism" produces optimal monetary policy if employment is persistent. We argue that the state-contingent nature of the scheme may undermine its credibility. We then show that...

This paper presents suggestive evidence of income shifting in response to differences in corporate tax rates for a large selection of OECD countries. We use a new method to disentangle the income shifting effects from the effects of tax rates on real activity. Our baseline estimates suggest that...

We explore endogenous monetary unification in the context of a model in which a country with serious structural distortions (and, hence, high inflation) is admitted into a monetary union once its economic structure has converged sufficiently towards that of the existing participants. If...

The political distortions in public investment projects are investigated within a bipartisan framework. The role of scrapping and modifying projects of previous governments receives special attention. The ruling party overspends on large ideological public investment projects and accumulates too...

The political distortions in public investment projects are investigated within the context of a bipartisan political economy framework. The role of scrapping and modifying projects of previous governments receives special attention. The party in government has an incentive to overspend on large...

We show that, with benevolent policymakers and fiscal leadership, monetary unification reduces inflation, taxes and public spending. These disciplining effects of a monetary union, which rise with the number of fiscal players in the union, are likely to raise welfare. Joining an optimally...