Duttagupta, Rupa; Tolosa, Guillermo - International Monetary Fund (IMF) - 2006
This paper assesses the nature of fiscal discipline under alternative exchange rate regimes. First, it shows in a … simple theoretical framework that fiscal agencies under a currency union with a fixed exchange rate can have the largest … incentive to overspend or "free-ride" (compared to those under other exchange rate regimes) owing to their ability to spread the …