This paper presents a rational political budget cycle model for an open economy, in which devaluations are delayed in the pre-election period so as to increase the electoral chances of the party in office. By concentrating on closed economies, previous political cycle models had overlooked the...

Fiscal decentralization is high on the agenda in policy fora. This paper empirically investigates the underlying causes of fiscal decentralization, based on the predictions of a simple political economy model. We argue that the likeliness that a central government engages in devolution of powers...