We study monetary and exchange-rate policies around successful and unsuccessful fiscal adjustments and find that successful adjustments are preceded by large nominal exchange rate depreciations, whereas unsuccessful adjustments are preceded by appreciations. Pre-adjustment depreciation is a...

We consider monetary-fiscal interactions when the monetary authority is more conservative than the fiscal. With both policies discretionary, (1) Nash equilibrium yields lower output and higher price than the ideal points of both authorities, (2) of the two leadership possibilities, fiscal...

In the transitional phase towards full economic integration, European countries have the possibility of re-shaping the continental geography of specialization. We use an Economic Geography model of industrial agglomeration to show how fiscal incentives can be critical in this phase. Differently...

The history of international lending shows that countries default on external debt when their economies experience a downturn. This paper presents a theoretical model of international lending that is consistent with this evidence. In this model, output is stochastic, international capital...

This paper tests empirically the strategic explanation of budget deficits suggested by Tabellini and Alesina and Persson and Svensson. Tabellini and Alesina suggest that governments with di erent political orientation provide different public goods. The model predicts that: a) public good...

We study investment in education in an overlapping generation model with altruism where credit market imperfections ration borrowing and cause persistent underinvestment in human capital. We characterize the optimal government policy and the policy that would emerge under majority voting in...