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Cited by 1,585Fiscal Policies and Political EconomyMonetary Policy and Economic ImpactEuropean Monetary and Fiscal Policies

Political and Monetary Institutions and Public Financial Policies in the Industrial Countries

Grilli, Vittorio, Masciandaro, Donato, Tabellini, Guido, Malinvaud, Edmond, Pagano, Marco·1991·Economic Policy
DOI 10.2307/1344630
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Abstract

Institutions and policies Vittorio Grilli, Donato Masciandaro and Guido Tabellini Why do countries as similar as the industrialized OECD countries go through such different experience in terms of public deficits and debts or in terms of inflation? The answer cannot come from macroeconomic policy responses to different disturbances, nor from the principles of optimal taxation, but rather from politics. This article focuses on the role that particular institutions exert in providing constraints and incentives which shape the actions of policymakers. The electoral process and political traditions affect the ability of governments to deal with deficits and mounting debts. What seems to matter most, it is found, is the effect of the durability of governments. Governments with short horizons act myopically and never quite tackle the hard choices. Such governments typically exist in countries with an electoral system favouring many small political parties. Central bank independence promotes low inflation with no apparent costs in terms of real economic performance, irrespective of the political institutions. In fact there is no link between monetary and fiscal discipline. These findings carry powerful implications for countries facing high indebtedness or stubborn inflation, but also for the construction of the European Economic and Monetary Union.

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  • A monetary authority with greater autonomy is associated with lower and more stable inflation.

    “Cross-country evidence finds that a monetary authority with greater autonomy is associated with lower and more stable inflation.”

    From Threats to central bank independence: High-frequency identification with twitter (2023) · cites this paper as Grilli, Masciandaro, and Tabellini (1991)

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Authors
Grilli, V., Masciandaro, D., Tabellini, G., Malinvaud, E., & Pagano, M.
Affiliations
  • Birkbeck, University of London (GB)
  • Bocconi University (IT)
  • University of California, Los Angeles (US)
ORCID
Venue
Economic Policy
Publisher
Oxford University Press (OUP)
Published
1991-10
Volume
6
Issue
13
Pages
341
ISSN
0266-4658 (ISSN-L)
DOI
10.2307/1344630
OpenAlex
W2045843512
Cited by
1,585
References
13
Citations by year
2026: 24 · 2025: 35 · 2024: 41 · 2023: 34 · 2022: 42 · 2021: 34 · 2020: 50 · 2019: 35 · 2018: 39 · 2017: 36 · 2016: 45 · 2015: 51 · 2014: 32 · 2013: 58 · 2012: 47
FWCI
72.53
Type
journal article
Language
en
Open access
closed
Locations
Economic Policy (publishedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Fiscal Policies and Political Economy
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
  • Social Sciences › Economics, Econometrics and Finance › Finance › European Monetary and Fiscal Policies
Keywords
political institutions, monetary institutions, public deficit, public debt, inflation, electoral systems, central bank independence, fiscal discipline, monetary discipline, political economy of fiscal policy, European Monetary Union, OECD countries

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