The dynamics of trade integration and the political value of commitment

The paper analyzes the importance of credible institutions in the process of trade liberalization. It combines aspects of credible policy announcements with adjustment costs. We show that if industries' profits are subject to adjustment costs, a dynamic link between periods arises that creates constituencies for a non-discretionary trade policy regime. The conditions for a government to select such an institutional solution are derive

Monetary union and the Maastricht inflation criterion: the accession countries

We model an accession country facing a Maastricht‐type inflation criterion that specifies an inflation ceiling. In addition to deciding whether or not to satisfy this criterion, the country must decide how much costly economic reform to undertake. If the country puts enough weight on the future that it can credibly meet the inflation criterion no matter what the ceiling is, then the inflation criterion benefits the country but lowers reform. If the country puts less weight on the future, then a criterion with a properly chosen inflation ceiling can increase reform. We derive the inflation ceilings that maximize the country's welfare and its reform

Uncertainty and Fiscal Policy in an Asymmetric Monetary Union

Monetary union, Fiscal policy, Transparency of monetary policy, Asymmetries, E 58, E 63, F 36,