Many countries, especially developing ones, follow procyclical fiscal polices, namely spending goes up (taxes go down) in booms and spending goes down (taxes go up) in recessions. We provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for...

How can monetary policy in stage III of European Monetary Union be coordinated between the ''ins'' and the ''outs''? This paper compares alternative institutional mechanisms, and concludes that a generalized system of inflation targets at the European level has several merits. It strengthens...

Observed fiscal policy varies greatly across time and countries. How can we explain this variation across time and countries? This paper surveys the recent literature that has tried to answer this question. We adopt a unified approach in portraying public policy as the equilibrium outcome of an...

We present a model of electoral accountability to compare the public finance outcomes under a presidential-congressional and a parliamentary system. In a presidential-congressional system, contrary to a parliamentary system, there are no endogenous incentives for legislative cohesion, but this...

Political constitutions are incomplete contracts and therefore leave scope for abuse of power. In democracies, elections are the primary mechanism for disciplining public officials, but they are not sufficient. Separation of powers between executive and legislative bodies also helps preventing...

This paper surveys some recent literature on fiscal policy and comparative politics. Economic policy is viewed as the outcome of a game with multiple-principals and multiple-agents. Opportunistic politicians bargain over policy. Rational voters hold them accountable through retrospective voting....

At the core of the ongoing political and academic debate on European integration lies a fundamental question: what is the appropriate assignment of policy tasks to different levels of government? This paper asks what economic theory has to say about this normative problem. Our starting point is...

This paper formulates a general theory of how political unrest influences public policy. Political unrest is motivated by emotions. Individuals engage in protests if they are aggrieved and feel that they have been treated unfairly. This reaction is predictable because individuals have a con...

We try to demonstrate how economists may engage in research on comparative politics, relating the size and composition of government spending to the political system. A Downsian model of electoral competition and forward-looking voting indicates that majoritarian---as opposed to...

Observed fiscal policy reflects the incentives embedded in political institutions. In this paper, we illustrate the effects of two general institutional features: separation of powers, which is common in Presidential-Congressional political systems, and legislative cohesion, which is typical of...