TY  - JOUR
AU  - Edwards,Sebastian
AU  - Tabellini,Guido
TI  - Explaining Fiscal Policies and Inflation in Developing Countries
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3493
PY  - 1992
Y2  - May 1992
UR  - http://www.nber.org/papers/w3493
L1  - http://www.nber.org/papers/w3493.pdf
N1  - Author contact info:
Sebastian Edwards
UCLA Anderson Graduate School of Business
110 Westwood Plaza, Suite C508
Box 951481
Los Angeles, CA 90095-1481
Tel: 310/206-6797
Fax: 310/206-5825
E-Mail: sebastian.edwards@anderson.ucla.edu

Guido Tabellini
IGIER Universita' Bocconi
Via Roentgen 1
20136 Milano
Italy
Tel: 39 2 583 6 3305; fax 3302
E-Mail: guido.tabellini@unibocconi.it
AB  - In this paper we investigate erririca1ly the determinants of inflation, seigniorage an fiscal deficits in developing countries. We first test the optimal taxation theory of inflation for a grip of 21 LDCs. We find that the implications of this theory is rejected for all the countries. We then proceed to implement a number of tests based on the new political economy approach to macroeconomic policies: we deal with some of the implications of a credibility and reputation model, and of a strategic government behavior model. We find that the data supports the most important predictions of the political economy view of fiscal policy. Our measures of political instability and political polarization play an important role in explaining cross country differences in seigniorage, inflation, government borrowing and fiscal deficits. We end by discussing directions for future research.
ER  -