Standard models of soft budget constraints consider bailouts as pure monetary transfers. However, in practice often additional obligations or restrictions, such as savings goals, are linked to monetary bailouts. This paper analyzes in a model of a federation if such restrictions change economic...

Standard models of soft budget constraints consider bailouts as pure monetary transfers. However, in practice often additional obligations or restrictions, such as savings goals, are linked to monetary bailouts. This paper analyzes in a model of a federation if such restrictions change economic...

We introduce political economics into the soft budget constraint problem by asking if the timing of elections has the potential to harden budget constraints. Specifically, we ask under which circumstances the soft budget constraint problem is worse—with synchronized elections, i.e....