Elections , Capital Flows , and Politico Economic Equilibria
نویسنده
چکیده
We study an open economy where a pro labor and a pro business candidate compete in an election. The winner chooses taxes, which affect investment returns. Electoral outcomes depend on the size of the foreign debt, but the debt itself reflects expectations about the election. The resulting interaction is novel and has several implications. Elections are associated with increased volatility. Politico economic crises can occur. Inefficiencies vanish if the candidates commit to an appropriate tax policy, but such commitments have predictable effects on the election. Empirical evidence supporting the theory is discussed. JEL: F3, D7, F4
منابع مشابه
Electoral Uncertainty and the Volatility of International Capital Flows∗
I study a small open economy in which electoral uncertainty affects and is affected by capital inflows. Two candidates, one favoring workers and another favoring entrepreneurs, run for office; the winner chooses tax policy, which affects investment returns. A pro labor electoral victory results in a "sudden stop" in investment and capital flows, reflecting a time inconsistency problem. While th...
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