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Pierre Faure
 
''Public debt accumulation and institutional quality: can corruption improve welfare?''
( 2011, Vol. 31 No.1 )
 
 
Corruption can enhance welfare in two complementary ways in a dynamic time inconsistency model: first, by mitigating the inflation bias of discretionary monetary policy; second, by reducing the loss due to the suboptimal distribution of distortions associated with public debt accumulation. The note thus proposes an original explanation of the existence of weak public governance in countries whose monetary regime lacks credibility.
 
 
Keywords: Corruption; fiscal and monetary policy; governance; public debt
JEL: E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General
H6 - National Budget, Deficit, and Debt: General
 
Manuscript Received : Jul 19 2010 Manuscript Accepted : Jan 04 2011

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