DP1290 | Optimum Electoral Areas

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The paper lies at the intersection between the literature on macroeconomics and politics and the literature on coordination. It uses models of political business cycles in an open economy setting to investigate the costs and benefits of forming electoral areas, i.e. regions where countries share the same electoral calendar. Both opportunistic and partisan models are considered. The main finding of the paper is that the desirability of an electoral area between two countries is enhanced when the spillovers between these countries are large and positive, and when they face symmetric shocks (or are of comparable size). Hence, if a group of countries constitutes an optimum currency area it is also likely to be an optimum electoral area.