DP12131 Institutions and Political Party Systems: The Euro Case

Author(s): Jesús Fernández-Villaverde, Tano Santos
Publication Date: July 2017
Keyword(s): euro, Federalism, Party Systems, Political Institutions
JEL(s): D72, F30, F40
Programme Areas: Monetary Economics and Fluctuations
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12131

This paper argues that institutions and political party systems are simultaneously determined. A large change to the institutional framework, such as the creation of the euro by a group of European countries, will realign -after a transition period- the party system as well. The new political landscape may not be compatible with the institutions that triggered it. To illustrate this point, we study the case of the euro and how the party system has evolved in Southern and Northern European countries in response to it.