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 analysis the intertemporal public finance decision under political instability. The government’s choice between inflationary finance and foreign debt is constrained by an interest rate, which is affected both by market conditions and debt conditionality. The main result is that...

Planned ‘‘surprise’’ devaluations are often spurred by non-economic circumstances: a rentseeking government; political instability; or the opportunity to put the blame on a predecessor government. In this paper, these aspects are incorporated in the monetary and fiscal policy framework...

This paper suggests that inflation may be affected differently by grand corruption compared to its positive nexus with petty corruption. In an extended Barro and Gordon (1983a) model grand corruption may serve as a quasi-commitment device: a cheating (expropriating) government may actually deter...

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...

It is generally believed that fiscal consolidations should occur prior to a country's admission to the European Monetary Union (EMU). This paper argues that the fiscal Maastricht Criteria require badly timed, costly adjustments while not guaranteeing sustained fiscal restraint. An effective...