IN THIS ISSUE...

Credibility and Politics
Torsten Persson and Guido Tabellini review the recent literature on the interrelationship of economic policy and political institutions, with particular emphasis on stabilization and taxation policies, exchange rate regimes and growth.

Fiscal Policy Coordination
Participants in conference in Tokyo on 7/8 January, organized by the Tokyo Center for Economic Research, NBER and CEPR considered the implications of open economies' interdependence and international financial integration for the coordination of their fiscal and monetary policies.

Regime Changes
At a CEPR workshop held jointly with the newly established Innocenzo Gasparini Institute for Economic Research in Milan on 14 January, participants considered the implications of expectations and political constraints for macroeconomic stabilization policies.

Eastern Europe
At the first major workshop in the Centre's programme of research on Economic Transformation in Eastern Europe, participants focused on the experience of and potential for fiscal reform, privatization, industrial restructuring and convertibility in the countries of East and Central Europe and the Soviet Union.

Discussion Papers

Michael Burda and Stefan Gerlach assess the roles of expectations and fundamentals in determining the Ostmark/Deutschmark exchange rate in the run-up to German unification.

Charles Wyplosz analyses how monetary union affects fiscal policy coordination and finds that full coordination and `no coordination' will both dominate the intermediate alternatives.

Alberto Giovannini and Martha de Melo find that `financial repression' in LDCs can account for up to 20% of central government revenue in some countries.

Frederick van der Ploeg identifies the major channels of international fiscal policy transmission and argues that, contrary to popular belief, uncoordinated national budgetary policies in a monetary union entail the risk that the public sector will be too small.

In three papers, Lars Svensson develops models in the theory of target zones and currency bands and tests them on Swedish exchange rate data.

George Alogoskoufis and Frederick van der Ploeg argue that the long-term effects of budgetary policies may dwarf their short-run effects on the relative shares of private and public consumption in national income.

Jeremy Edwards and Klaus Fischer dispute the common assertion that the position of banks in the German economy has contributed significantly to its strong performance.

André Sapir identifies the key features that distinguish services from other economic activities and assesses their influence on market structures.

Richard Portes argues that a commitment by East European governments to early convertibility may enhance their credibility and thereby help establish its `preconditions'.

Andrew Hughes Hallett, Patrick Minford and Anupam Rastogi estimate the welfare costs of the Exchange Rate Mechanism of the EMS under a variety of operating rules.

Giuseppe Bertola and Ricardo Caballero use a target zone model to show that if agents have no information on reserves, the exchange rate should behave as under a free float.

Juan Dolado and José Viñals find evidence of recent over-appreciation of the peseta, which they propose eliminating through policies to promote savings.

Riccardo Faini and Alberto Heimler show that following the completion of the European internal market, protection of textiles may paradoxically increase LDCs' penetration of the higher-quality market segments previously dominated by domestic producers.