In 1993, Czechoslovakia experienced a two-step break-up. On January 1, the country disintegrated as a political union, while preserving an economic and monetary union. Then, the Czech-Slovak monetary union collapsed on February 8. This paper analyzes the economic background of the two break-ups...

I formulate a political-economy model of a fiscal union where the threat of secession imposes a limit on fiscal redistribution between regions. I argue that the trade-off between implementing the region's preferred fiscal policy and benefiting from inter-regional risk sharing depends on the...

I propose a political-economy model of optimal .scal unions where the threat of secession imposes a limit on .scal redistribution between regions. Fiscal transfers take place indirectly, through centralized .scal policy. I argue that the stability of .scal unions depends on the nature of...