Endogenous policy leads to inefficient risk sharing
We analyze risk sharing and endogenous fiscal spending in a two-region model with sequentially complete markets. Fiscal policy is determined by majority voting. When policy setting is decentralized, regions choose fiscal spending in an attempt to manipulate security prices. This leads to incomplete...
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Published in | Review of economic dynamics Vol. 7; no. 3; pp. 758 - 787 |
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Main Authors | , , |
Format | Journal Article |
Language | English |
Published |
Orlando
Elsevier Inc
01.07.2004
Academic Press |
Subjects | |
Online Access | Get full text |
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