This paper investigates whether monetary and exchange rate policies are important for the success of major fiscal adjustments. We assess their role controlling for other determinants of success identified in the literature, including the size and composition of the deficit cut, the level of...

This paper tests empirically the strategic explanation of budget deficits suggested by Tabellini and Alesina [13] and Persson and Svensson [12]. Tabellini and Alesina suggest that governments with different political orientation provide different public goods. The model predicts that: a) public...

This paper characterizes monetary and exchange-rate policies during successful and unsuccessful fiscal adjustments by analyzing the OECD economies over the period 1970 to 1998. We find that successful adjustments are almost always preceded by large nominal and real exchange rate depreciations...