A government applying for a club membership may strategically delay entry to cope with the hold-up problem introduced by anticipatory investments of the private sector. In equilibrium of a two-period incomplete information game, we find that a pro-entry government may strategically delay to imitate an anti-entry government and thereby affect expectations of the private sector. The delay is more likely if the government has a good electoral prospect, is internationally weak, and is not considered to be too keen on entry. The model is related to the case of the Czech Republic where the government recently softened commitment in the euro adoption strategy.
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Paper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number
2008/16.
Find related papers by JEL classification: D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System F31 - International Economics - - International Finance - - - Foreign Exchange F50 - International Economics - - International Relations and International Political Economy - - - General
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