Working Paper: NBER ID: w12049
Authors: Alberto Alesina; Silvia Ardagna; Francesco Trebbi
Abstract: 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.
Keywords: political economy; economic reforms; budget deficits; inflation; IMF programs
JEL Codes: G0; H0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Crisis (H12) | Likelihood of Stabilization (C62) |
| Strong Government (H10) | Likelihood of Stabilization (C62) |
| Crisis + Strong Government (H12) | Likelihood of Stabilization (C62) |
| Post-Election (K16) | Likelihood of Stabilization (C62) |
| Fewer Veto Points (D72) | Likelihood of Stabilization (C62) |
| IMF Programs (F32) | Likelihood of Stabilization (C62) |