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...

Lack of commitment in monetary policy leads to the well known Barro-Gordon inflation bias. In this paper, we argue that two phenomena associated with the time inconsistency problem have been overlooked in the exchange rate debate. We show that, absent commitment, independent monetary policy can...

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,...