This paper investigates the behavior of rent-seeking politicians in an environment of increasing economic integration. The focus of the paper is on the implications of globalization-induced political yardstick competition for constitutional design with a view to the current discussion in the...

We provide a tractable model to study monetary policy under discretion. We restrict our analysis to Markov equilibria. We find that for all parametrizations with an equilibrium inflation rate of about 2 percent, there is a second equilibrium with an inflation rate just above 10 percent. Thus,...