This paper considers the consequences of international financial market integration for national fiscal and monetary policies that derive from the absence of an international sovereign authority to define and enforce contractual obligations across borders. The sovereign immunity of national...

This paper studies the interactions between electoral considerations and the imposition of price controls by opportunistic policymakers. The analysis shows that a policy cycle emerges in which price controls are imposed in periods leading to the election, and removed immediately afterwards. The...

We investigate whether private information about citizens'' competence in political office can be revealed by their entry and campaign expenditure decisions. We find that this depends on whether voters and candidates have common or conflicting interests; only in the former case can entry be...

This paper studies a principal-agent model of the relationship between an incumbent officeholder and the electorate, where the officeholder is initially uninformed about her ability. If officeholder effort and ability interact in the ""production function"" that determines performance in office,...

This paper develops a model of political regulation in which politicians set the regulated price in order to maximize electoral support by signaling to voters a pro-consumer behavior. Political incentives and welfare constraints interact in the model, yielding an equilibrium in which the real...

This paper examines the impact of macroeconomic and financial sector policy announcements in the United States, the United Kingdom, the euro area, and Japan during the recent crisis on interbank credit and liquidity risk premia. Announcements of interest rate cuts, liquidity support, liability...

It is shown that the inefficiencies created by the “soft” budget constraint, enjoyed by enterprises in Eastern Europe and elsewhere, will continue so long as governments are unable credibly to threaten not to bail out loss-makers. Commitment to a “hard” budget constraint can best be...

This paper analyses the role of social safety nets in the form of redistributional transfers and wage subsidies. It is argued that public welfare programs can be viewed as a crime-preventing or disruption-preventing devices because they tend to increase the opportunity cost of engaging in crime...

Population aging puts significant pressure on social security systems that are based mainly on a pay-as-you-go (PAYG) formula and determined by the political process in which both retirees and future retirees participate. This paper demonstrates that in an economic and demographic steady state,...