Pierluigi Balduzzi, Emanuele Brancati, M. Brianti, F. Schiantarelli
We study the financial and real effects of political risk shocks for Italy, Spain, Ireland, Portugal, and Greece between 2008 and 2019. We build an instrument for these shocks using the changes of the sovereign yield spread around political and policy dates and estimate their effects in the context of Local Projection. We show that adverse political risk shocks have negative effects on domestic financial markets and in some countries generate spillovers on the spreads of other euro-zone economies. Moreover, in Italy populism-related political risk shocks have a larger effect on financial markets and they harm the real economy.
{"title":"Political Risk, Populism, and the Economy","authors":"Pierluigi Balduzzi, Emanuele Brancati, M. Brianti, F. Schiantarelli","doi":"10.1093/ej/uead017","DOIUrl":"https://doi.org/10.1093/ej/uead017","url":null,"abstract":"\u0000 We study the financial and real effects of political risk shocks for Italy, Spain, Ireland, Portugal, and Greece between 2008 and 2019. We build an instrument for these shocks using the changes of the sovereign yield spread around political and policy dates and estimate their effects in the context of Local Projection. We show that adverse political risk shocks have negative effects on domestic financial markets and in some countries generate spillovers on the spreads of other euro-zone economies. Moreover, in Italy populism-related political risk shocks have a larger effect on financial markets and they harm the real economy.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"122 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88099232","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies optimal fiscal policy in a currency union subject to capital flow shocks in an economy with two main ingredients: i) sticky prices and ii) financially constrained arbitrageurs. Given capital outflows and high external debt, the fiscal authority faces a trade-off between stimulating the economy or paying off external debt. The planner reduces the VAT in the short-run, while it raises and front-load the sum of VAT and payroll taxes. It is not optimal to use spending to stimulate the economy. The country engages in a fiscal consolidation, as government debt falls compared with a passive fiscal policy.
{"title":"Optimal Fiscal Consolidation Under Frictional Financial Markets","authors":"D. Silva","doi":"10.1093/ej/uead013","DOIUrl":"https://doi.org/10.1093/ej/uead013","url":null,"abstract":"\u0000 This paper studies optimal fiscal policy in a currency union subject to capital flow shocks in an economy with two main ingredients: i) sticky prices and ii) financially constrained arbitrageurs. Given capital outflows and high external debt, the fiscal authority faces a trade-off between stimulating the economy or paying off external debt. The planner reduces the VAT in the short-run, while it raises and front-load the sum of VAT and payroll taxes. It is not optimal to use spending to stimulate the economy. The country engages in a fiscal consolidation, as government debt falls compared with a passive fiscal policy.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"104 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-01-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79713508","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the causal effect of political legitimacy on stability, using the historical case of Imperial China. Chinese rulers ascribed their legitimacy to a heavenly mandate. Calamities like earthquakes were considered as a sign of weakened approval, making quakes a proxy for negative legitimacy shock. I use quake-induced minor shaking (i.e., strong enough to be felt but too weak to cause material damage) to demonstrate that legitimacy shocks cause more conflicts. I examine whether quakes serve as a coordination device to overcome collective action problems.
{"title":"Shaking Legitimacy: The Impact of Earthquakes on Conflict in Historical China","authors":"Ying Bai","doi":"10.1093/ej/uead004","DOIUrl":"https://doi.org/10.1093/ej/uead004","url":null,"abstract":"\u0000 This paper examines the causal effect of political legitimacy on stability, using the historical case of Imperial China. Chinese rulers ascribed their legitimacy to a heavenly mandate. Calamities like earthquakes were considered as a sign of weakened approval, making quakes a proxy for negative legitimacy shock. I use quake-induced minor shaking (i.e., strong enough to be felt but too weak to cause material damage) to demonstrate that legitimacy shocks cause more conflicts. I examine whether quakes serve as a coordination device to overcome collective action problems.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"10 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-01-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79479771","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study the role of new-product quality for the dynamics of durable-goods expenditures around the Great Recession. We assemble a rich dataset on US new-car markets during 2004-2012, combining data on transaction prices with detailed information about vehicles’ technical characteristics. During the recession, a reallocation of expenditures away from high-quality new models accounts for a significant decline in the dispersion of expenditures. In turn, car manufacturers introduced new models of lower quality. The drop in new-model quality persistently depressed the technology embodied in vehicles, and likely contributed to the slow recovery of expenditures.
{"title":"Dynamics of Expenditures on Durable Goods: The Role of New-Product Quality","authors":"Fabio Bertolotti, A. Gavazza, Andrea Lanteri","doi":"10.1093/ej/uead006","DOIUrl":"https://doi.org/10.1093/ej/uead006","url":null,"abstract":"\u0000 We study the role of new-product quality for the dynamics of durable-goods expenditures around the Great Recession. We assemble a rich dataset on US new-car markets during 2004-2012, combining data on transaction prices with detailed information about vehicles’ technical characteristics. During the recession, a reallocation of expenditures away from high-quality new models accounts for a significant decline in the dispersion of expenditures. In turn, car manufacturers introduced new models of lower quality. The drop in new-model quality persistently depressed the technology embodied in vehicles, and likely contributed to the slow recovery of expenditures.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"36 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-01-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89715395","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In a Hotelling model with a climate coalition and a free-riding fringe, we compare demand-side and supply-side climate policies aimed at keeping CO2 concentration below a ceiling equivalent to global warming of 2○C. With the demand-side policy, the coalition caps its fuel demand. The corresponding allocation is intra-temporally distorted. With the supply-side policy, the coalition purchases deposits. The corresponding allocation is inter-temporally distorted and the fuel extraction path can be discontinuous. In an empirically calibrated economy, a medium-sized [the grand] coalition is stable with the demand[supply]-side policy If the coalition acts strategically, the stable grand coalition implements first best.
{"title":"Demand- Versus Supply-Side Climate Policies with a Carbon Dioxide Ceiling","authors":"T. Eichner, Gilbert Kollenbach, M. Schopf","doi":"10.1093/ej/uead002","DOIUrl":"https://doi.org/10.1093/ej/uead002","url":null,"abstract":"\u0000 In a Hotelling model with a climate coalition and a free-riding fringe, we compare demand-side and supply-side climate policies aimed at keeping CO2 concentration below a ceiling equivalent to global warming of 2○C. With the demand-side policy, the coalition caps its fuel demand. The corresponding allocation is intra-temporally distorted. With the supply-side policy, the coalition purchases deposits. The corresponding allocation is inter-temporally distorted and the fuel extraction path can be discontinuous. In an empirically calibrated economy, a medium-sized [the grand] coalition is stable with the demand[supply]-side policy If the coalition acts strategically, the stable grand coalition implements first best.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"34 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78142321","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We exploit a fixed rule constraining central bank credit provision in a regression discontinuity framework to analyse counterparties’ behavioural responses to the (non)receipt of liquidity during a crisis. In spring 1847, the Bank of England suddenly started rationing credit to avoid violating its gold reserve requirement. We show that counterparties which suffered rejection from the Bank were more likely to fail. Conditional on survival, rationed counterparties learned from their experience and changed behaviour during a subsequent panic in fall 1847: they came to the discount window more often, but submitted smaller requests and relied less on central bank liquidity overall.
{"title":"Dating the Lender of Last Resort","authors":"K. Rieder, M. Anson, D. Bholat, R. Thomas","doi":"10.1093/ej/ueac089","DOIUrl":"https://doi.org/10.1093/ej/ueac089","url":null,"abstract":"\u0000 We exploit a fixed rule constraining central bank credit provision in a regression discontinuity framework to analyse counterparties’ behavioural responses to the (non)receipt of liquidity during a crisis. In spring 1847, the Bank of England suddenly started rationing credit to avoid violating its gold reserve requirement. We show that counterparties which suffered rejection from the Bank were more likely to fail. Conditional on survival, rationed counterparties learned from their experience and changed behaviour during a subsequent panic in fall 1847: they came to the discount window more often, but submitted smaller requests and relied less on central bank liquidity overall.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"3 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-12-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89650210","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A variety of external conditions may affect individual performances in high stakes cognitive assessments, with potentially lasting consequences on earnings and career. We provide the first causal evidence that the time of the day is an important condition affecting the performance at the moment of an evaluation. Exploiting a setting in which cognitive assessments are quasi-randomly assigned at a different time of day, we find that peak performance occurs in the early afternoon. The estimated time of day effects follow specific patterns consistent with the circadian rhythm, which suggests that biological factors are important determinants of performances even in economically meaningful settings.
{"title":"Time of Day and High Stakes Cognitive Assessments","authors":"A. Gaggero, Denni Tommasi","doi":"10.1093/ej/ueac090","DOIUrl":"https://doi.org/10.1093/ej/ueac090","url":null,"abstract":"\u0000 A variety of external conditions may affect individual performances in high stakes cognitive assessments, with potentially lasting consequences on earnings and career. We provide the first causal evidence that the time of the day is an important condition affecting the performance at the moment of an evaluation. Exploiting a setting in which cognitive assessments are quasi-randomly assigned at a different time of day, we find that peak performance occurs in the early afternoon. The estimated time of day effects follow specific patterns consistent with the circadian rhythm, which suggests that biological factors are important determinants of performances even in economically meaningful settings.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"28 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-12-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89864508","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Gustav Agneman, Paolo Falco, Exaud Joel, O. Selejio
Trusting behaviour is a cornerstone of cooperation and, hence, economic performance, not least in poorer communities where economic transactions often rely on informal agreements. But trusting behaviour is potentially costly since the counterpart may decide to defect. In this study, we investigate whether food scarcity influences the level of trusting behaviour in rural Tanzania by leveraging quasi-experimental variation in food supply induced by the harvest. Through a lab-in-the-field experiment, we document that farmers display lower levels of trusting behaviour during the lean season compared to the abundant season and show that the difference is explained by variation in food scarcity.
{"title":"The Material Basis of Cooperation: How Scarcity Reduces Trusting Behaviour","authors":"Gustav Agneman, Paolo Falco, Exaud Joel, O. Selejio","doi":"10.1093/ej/ueac087","DOIUrl":"https://doi.org/10.1093/ej/ueac087","url":null,"abstract":"\u0000 Trusting behaviour is a cornerstone of cooperation and, hence, economic performance, not least in poorer communities where economic transactions often rely on informal agreements. But trusting behaviour is potentially costly since the counterpart may decide to defect. In this study, we investigate whether food scarcity influences the level of trusting behaviour in rural Tanzania by leveraging quasi-experimental variation in food supply induced by the harvest. Through a lab-in-the-field experiment, we document that farmers display lower levels of trusting behaviour during the lean season compared to the abundant season and show that the difference is explained by variation in food scarcity.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"7 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74535373","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We argue that the recent increases in market concentration and markups are partly due to an ‘innovation feedback effect’ of globalisation. Lower trade costs increase innovation incentives for global firms. As the winners of the ensuing innovation race increase their technological advantage, concentration and markups rise. We develop an endogenous growth model capturing this effect and calibrate it to US manufacturing data. We find that the increase in trade between 1989 and 2007 raised the aggregate markup by 3.5 percentage points. This is entirely due to innovation: without the innovation response, markups would have fallen by 4 percentage points.
{"title":"International Trade and Innovation Dynamics with Endogenous Markups","authors":"Laurent Cavenaile, Pau Roldan-Blanco, Tom Schmitz","doi":"10.1093/ej/ueac085","DOIUrl":"https://doi.org/10.1093/ej/ueac085","url":null,"abstract":"\u0000 We argue that the recent increases in market concentration and markups are partly due to an ‘innovation feedback effect’ of globalisation. Lower trade costs increase innovation incentives for global firms. As the winners of the ensuing innovation race increase their technological advantage, concentration and markups rise. We develop an endogenous growth model capturing this effect and calibrate it to US manufacturing data. We find that the increase in trade between 1989 and 2007 raised the aggregate markup by 3.5 percentage points. This is entirely due to innovation: without the innovation response, markups would have fallen by 4 percentage points.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"10 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82984163","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Relying on a large-scale experiment in Peru, this study evaluates the effects of an in-class intervention on financial literacy and financial behavior. As soon as the program is over, treated students record significant financial literacy gains that do not hinder their academic performance. The program also leads to immediate changes in downstream financial behavior as measured by financial autonomy and financial savviness. Credit bureau records gathered three years later show that early improvements in financial literacy translate into limited, but positive long-lasting changes in financial behavior. The treatment did not affect students’ credit or repayment behavior on the extensive margin, but, among those few with outstanding loans, it reduced arrears by 20%.
{"title":"Is School-Based Financial Education Effective? Immediate and Long-Lasting Impacts on High School Students","authors":"Verónica Frisancho","doi":"10.1093/ej/ueac084","DOIUrl":"https://doi.org/10.1093/ej/ueac084","url":null,"abstract":"\u0000 Relying on a large-scale experiment in Peru, this study evaluates the effects of an in-class intervention on financial literacy and financial behavior. As soon as the program is over, treated students record significant financial literacy gains that do not hinder their academic performance. The program also leads to immediate changes in downstream financial behavior as measured by financial autonomy and financial savviness. Credit bureau records gathered three years later show that early improvements in financial literacy translate into limited, but positive long-lasting changes in financial behavior. The treatment did not affect students’ credit or repayment behavior on the extensive margin, but, among those few with outstanding loans, it reduced arrears by 20%.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"21 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87169384","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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