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298
Exchange Market Mayhem: The Antecedents and Aftermath of Speculative Attacks
- Economic Policy
, 1995
"... This paper uses graphical techniques and multinomial logit analysis to evaluate the causes and consequences of episodes of turbulence in foreign exchange markets. Using a quarterly panel of data from 1959 through 1993 for twenty OECD countries, we consider the antecedents and aftermath of devaluatio ..."
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Cited by 229 (18 self)
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This paper uses graphical techniques and multinomial logit analysis to evaluate the causes and consequences of episodes of turbulence in foreign exchange markets. Using a quarterly panel of data from 1959 through 1993 for twenty OECD countries, we consider the antecedents and aftermath of devaluations and revaluations, flotations, fixings, and speculative attacks (which may not be successful). We find that realignments of fixed exchange rates are alike: devaluations are preceded by political instability, budget and current account deficits and fast growth of money, and prices. Revaluations are mirror images of devaluations. These movements are largely consistent with the standard speculative attack model. In contrast, few consistent correlations link regime transitions like flotations or fixings to macroeconomic or political variables. Transitions between exchange rate regimes are largely idiosyncratic, and are neither consistently provoked ex ante by systematic imbalances, nor typically justified ex post by subsequent changes in policy. We conclude that there are no clear early warning signals of many speculative attacks, and no easy solutions for
The Political Economy of Budget Deficits
- International Monetary Fund Staff Papers
, 1995
"... This paper was written while Alesina was a visiting scholar in the Fiscal Affairs Department of the IMF. Perotti also spent two weeks in the same Department. We are very grateful to the Department in general and to Mr. Vito Tanzi in particular for his hospitality. We thank ..."
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Cited by 180 (2 self)
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This paper was written while Alesina was a visiting scholar in the Fiscal Affairs Department of the IMF. Perotti also spent two weeks in the same Department. We are very grateful to the Department in general and to Mr. Vito Tanzi in particular for his hospitality. We thank
A dynamic theory of public spending, taxation, and debt. Unpublished manuscript
, 2006
"... This paper presents a dynamic political economy theory of public spending, taxation and debt. Policy choices are made by a legislature consisting of representatives elected by geographically-defined districts. The legislature can raise revenues via a distortionary income tax and by borrowing. These ..."
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Cited by 59 (2 self)
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This paper presents a dynamic political economy theory of public spending, taxation and debt. Policy choices are made by a legislature consisting of representatives elected by geographically-defined districts. The legislature can raise revenues via a distortionary income tax and by borrowing. These revenues canbeusedtofinance a national public good and district-specific transfers (interpreted as pork-barrel spending). The value of the public good is stochastic, reflecting shocks such as wars or natural disasters. In equilibrium, policy-making cycles between two distinct regimes: “business-as-usual ” in which legislators bargain over the allocation of pork, and “responsible-policy-making ” in which policies maximize the collective good. Transitions between the two regimes are brought about by shocks in the value of the public good. In the long run, equilibrium tax rates are too high and too volatile, public good provision is too low and debt levels are too high. In some environments, a balanced budget requirement can improve citizen welfare.
2004 . "Constitutions and economic policy
- Journal of Economic Perspectives
"... 1 At the rare moments in history when a nation debates constitutional reform, the key issues often concern how the reforms might affect economic policy and economic performance. For example, Italy abandoned a system of pure proportional representation, where legislators were elected according to the ..."
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Cited by 55 (2 self)
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1 At the rare moments in history when a nation debates constitutional reform, the key issues often concern how the reforms might affect economic policy and economic performance. For example, Italy abandoned a system of pure proportional representation, where legislators were elected according to the proportions of the popular national vote received by their parties, and moved toward including ingredients of plurality rule, where legislators are elected in each district according to who receives the highest number of votes. Key Italian political leaders are now considering proposals to introduce elements of presidentialism, where the head of government is elected by direct popular vote, rather than the current parliamentary regime. A common argument in Italy was that the electoral reform would help stifle political corruption and reduce the propensity of Italian governments to run budget deficits. In the 1990s, constitutional reforms have been debated and implemented in a number of other countries too. For instance, New Zealand moved away from a pure system of plurality rule in single-member districts to a system mixing elements of proportional representation. Japan also renounced its special form of plurality rule (the so-called single non-transferable vote) in favor of a system that mixes elements of proportional and plurality representation. Similar proposals have
Majoritarian Electoral Systems and Consumer Power: Price-Level Evidence from the OECD
- Countries.” American Journal of Political Science
, 2002
"... ABSTRACT: A straightforward extension of the standard Stigler-Peltzman model of regulation, coupled with a Taagepera-Shugart analysis of electoral-system effects, suggests: (a) that the greater seat-vote elasticities of majoritarian electoral systems will tilt policy in favor of consumers, while pr ..."
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Cited by 42 (2 self)
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ABSTRACT: A straightforward extension of the standard Stigler-Peltzman model of regulation, coupled with a Taagepera-Shugart analysis of electoral-system effects, suggests: (a) that the greater seat-vote elasticities of majoritarian electoral systems will tilt policy in favor of consumers, while proportional systems should strengthen producers; and (b) that the pro-consumer bias of majoritarian systems should be manifested in systematically lower prices. Empirical tests, controlling for the structural determinants of national price levels established in the earlier "law of one price" literature, establish majoritarian electoral systems as a significant and robust predictor, lowering national price levels in the mean OECD country by approximately ten percent.
2002), “Patching up the Pact: Some Suggestions for Enhancing Fiscal Sustainability and Macroeconomic Stability in an Enlarged
- Design Choices for Fiscal Policy Rules 551 European Union”, Centre for Economic Policy Research, Discussion Paper
"... The views and opinions expressed in this paper are those of the authors alone. They do not necessarily represent the views and opinions of the European Bank for Reconstruction and Development. We would like to thank Ricardo Lago for helpful comments on earlier drafts of this paper. The paper conside ..."
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Cited by 40 (3 self)
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The views and opinions expressed in this paper are those of the authors alone. They do not necessarily represent the views and opinions of the European Bank for Reconstruction and Development. We would like to thank Ricardo Lago for helpful comments on earlier drafts of this paper. The paper considers the implications for the EU accession candidates of Central and Eastern Europe of the fiscal-financial constraints imposed by the Stability and Growth Pact and the Maastricht Treaty. Our findings apply also to those current EU members whose initial conditions (e.g. infrastructure and progress in state pension reform) or other structural characteristics (e.g. demographic structure, growth potential, Balassa-Samuelson equilibrium real exchange rate appreciation) differ significantly from the EU average. We find the existing criteria to be seriously flawed and propose an alternative rule, the Permanent Balance Rule, based on a strong from of tax smoothing.
How do budget deficits and economic growth affect reelection prospects? Evidence from a large panel of countries
- American Economic Review
, 2008
"... ABSTRACT: Conventional wisdom is that good economic conditions and expansionary fiscal policy help incumbents get reelected, but this has not been tested in a large cross-section of countries. We test these arguments in a sample of 74 countries over the period 1960-2003. We find no evidence that def ..."
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Cited by 40 (1 self)
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ABSTRACT: Conventional wisdom is that good economic conditions and expansionary fiscal policy help incumbents get reelected, but this has not been tested in a large cross-section of countries. We test these arguments in a sample of 74 countries over the period 1960-2003. We find no evidence that deficits help reelection in any group of countries – developed and less developed, new and old democracies, countries with different government or electoral systems, and countries with different levels of democracy. In developed countries and in old democracies, election-year deficits actually reduce the probability that a leader is reelected, with similar, although smaller, negative electoral effects of deficits in the earlier years of an incumbent's term in office. Higher growth rates of real GDP per-capita raise the probability of reelection only in the less developed countries and in new democracies, but voters are affected by growth over the leader's term in office rather than in the election year itself and apparently only by growth not attributed to global growth. Low inflation is rewarded by voters only in the developed countries. The effects we find are not only statistically significant, but also quite substantial quantitatively. We also suggest how the absence of a positive electoral effect of deficits can be consistent with the political deficit cycle found in new democracies.
Cross-country determinants of life satisfaction: exploring dierent determinants across groups in society
- Social Choice and Welfare
, 2008
"... This paper explores a wide range of cross-country determinants of life satisfaction exploiting a database of 90,000 observations in 70 countries. We distinguish four groups of aggregate variables as potential determinants of satisfaction: political, economic, institutional, and human development and ..."
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Cited by 38 (13 self)
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This paper explores a wide range of cross-country determinants of life satisfaction exploiting a database of 90,000 observations in 70 countries. We distinguish four groups of aggregate variables as potential determinants of satisfaction: political, economic, institutional, and human development and culture. We use ordered probit to investigate the importance of these variables on individual life satisfaction and test the robustness of our results with Extreme Bounds Analysis. The results show that only a small number of factors, such as openness, business climate, postcommunism, the number of chambers in parliament, Christian majority, and infant mortality robustly influence life satisfaction across countries while the importance of many variables suggested in the previous literature is not confirmed. This remains largely true when the analysis splits national populations according to gender, income and political orientation also.
