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Who Adjusts and When? On the Political Economy of Reforms

  • Alberto Alesina
  • Silvia Ardagna
  • Francesco Trebbi

Why do countries delay stabilizations of large and increasing budget deficits and inflation? And what explains the timing of reforms? We use the war of attrition model as a guidance for our empirical study on a vast sample of countries. We find that stabilizations are more likely to occur when time of crisis occur, at the beginning of term of office of a new government, in countries with "strong" governments (i.e. presidential systems and unified governments with a large majority of the party in office), and when the executive faces less constraints. The role of external inducements like IMF programs has at best a weak effect, but problem of reverse causality are possible.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12049.

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Date of creation: Feb 2006
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Publication status: published as Alesina, Alberto, Silvia Ardagna, and Francesco Trebbi. “Who Adjusts and When? On the Political Economy of Stabilizations.” IMF Staff Papers, Mundell-Fleming Lecture, 53: 1-49, 2006 .
Handle: RePEc:nbr:nberwo:12049
Note: EFG PE POL
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