We analyze the political economy of monetary unification among countries with different quality of institutions. Countries with stronger institutions have lower public spending and better investment incentives, even under a stronger currency. Governments under weaker institutions spend more so...

We analyze the political economy of monetary unification among countries with different quality of institutions. Countries with stronger institutions have lower public spending and better investment incentives, even under a stronger currency. Governments under weaker institutions spend more so...

This work examines the political economy of exchange-rate policies in the eastward expansion of the eurozone. Analysis shows that prospective members of the EMU are likely to pass on some costs of convergence to the current EMU members. The mechanism is an altered exchange-rate policy that...

We analyze fiscal rules within a Monetary Union in the presence of (i) asymmetric information on member states' potential output and (ii) bail-out among member states. The first-best deficit is contingent on the cycle, that is, on member states' output gap. In the presence of asymmetric...