The Euro Blame Game and its Implications for Policy and Financial Markets
American Consortium on European Union Studies (ACES) EU Center of Excellence Washington, D.C. Available at: Archive of European Integration (AEI), University of Pittsburgh: (2012) , ACES Cases No. 2012.2.
Abstract: The recent financial crisis in some of the eurozone member countries has received a great deal of attention by investors, policy makers and commentators alike. Often these events are interpreted as a failure of the euro and the sustainability of the eurozone is called into question. This paper shows that this analysis and its emphasis are flawed. Fiscal imbalances and financial market imperfections are at the core of the problem, and they need to be addressed directly to prevent future crises.
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A Political Economy Model of Health Insurance Policy
Atlantic Economic Journal , 38(1), 2010, pp. 23-36
Abstract: This paper aims to explain the divergent path of U.S. health policy from other high-income countries. The paper develops a general framework of interest group politics to study how the organization of industry can shape health insurance coverage and greater public involvement in health insurance. Large firms face a higher degree of unionization and provide more health coverage for employees than small firms. Consequently, large firms favor the adoption of a policy of universal health care coverage as a means of divesting health care costs to the public sector. Public aversion to higher taxation counterbalances this effect.
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Financial Markets and Exchange Rates in Transition to the European Monetary Union
Intereconomics , 44(3), 2009, pp. 142-148
Abstract: This paper highlights that the EMU transition process itself can pose challenges to individual accession countries and draws policy implications for ERM II. Differences in financial market development and international liabilities underscore the risks and benefits of ERM II, and may lead to conflict between short and long-term policy objectives.
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Government Size and Openness Revisited: The Case of Financial Globalization
Kyklos , 62(3), 2009, pp. 394-406
Abstract: The volatility of international capital flows to emerging markets has been well documented. Financial globalization may not in general fulfill its theoretical role as a risk sharing mechanism in financially underdeveloped economies, and hence may provide an impetus for compensating government spending. Comparative studies of the public sector have provided evidence of a robust positive association between government size and openness of the economy to trade flows. This paper extends the existing literature by investigating the relationship between government size and financial openness for 87 developing and developed countries between 1976 and 2003. The analysis reveals a positive relationship between exposure to international capital flows and government size. Furthermore, interacting capital flows with income levels shows that richer open economies tend to have smaller government size. These findings are consistent with the hypothesis that benefits of financial integration, in terms of improved risk-sharing and consumption smoothing, accrue only beyond a certain minimum level of financial development.
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The Political Economy of Exchange Rate Regime Choice: Theory and Evidence
Economic Systems , 32(4), 2008, pp. 354-371
Abstract: This paper studies exchange rate regime choice from a positive perspective by modeling the interplay of monetary and fiscal policy, credibility and financial market microstructure as factors influencing the decision on de facto regime. The model shows how a small open economy reliant on foreign sources of financing is likely to opt for a stable regime. Furthermore, a stable political environment with a high degree of accountability is conducive to choosing a flexible regime. The findings suggest that flexible rather than fixed exchange rate regimes provide more fiscal discipline.
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Teaching Law and Economics from a Positive Perspective: The Political Economy of Policy Design in University Curricula
Global Jurist , 8(2), 2008 (online)
Abstract: This paper challenges the traditionally normative perspective on the teaching of Law and Economics that focuses on evaluating the economic efficiency of specific laws. Widening the lens of analysis from normative to positive by accounting for the political process of law and policy design would help students of economics, public policy and law to reconcile the frequent divergence between normative recommendations and actual policy implementation. The case study of an undergraduate course on the Political Economy of Public Policy highlights the unique benefits of an interdisciplinary approach to curriculum design through enhancing student learning and the development of critical analytical skills.
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