Political booms, financial crises: Why popular governments are not always a good sign
Christoph Trebesch, Helios Herrera, Guillermo L. Ordoñez06 September 2014
Financial crises are often credit booms gone bust. This column argues that ‘political booms’, defined as an increase in government popularity, are also a good predictor of financial crises. The phenomenon of ‘political booms gone bust’ is, however, only observable in emerging markets. In these countries, politicians have more to gain from riding the popularity benefits of unsustainable booms.
Financial crises: the search for early warning indicators
Financial crises are a recurrent phenomenon in the history of emerging markets and advanced economies alike. To understand the common causes of these crises and to prevent future ones from developing, economists have a long tradition of studying early warning indicators. Two well-documented predictors of financial crises are credit booms and capital flow bonanzas.
The US economy performs better under Democratic presidents. Why?
Alan S. Blinder, Mark Watson04 September 2014
Since World War II, economic growth has been faster in the US under Democratic presidents than under Republican ones. This column documents that which party controls Congress does not matter for growth, that the Democratic growth advantage is concentrated in the first two years of a presidency, and that presidential party affiliation Granger-causes growth. Neither fiscal nor monetary policy can account for this gap. Instead, the factors that have explanatory promise are: shocks to oil prices, total factor productivity, European growth, and consumer expectations of future economic conditions.
Economists and political scientists – not to mention the political commentariat – have devoted a huge amount of attention to the well-established fact that faster economic growth helps re-elect the incumbent party (see, for example, Fair 2011 for the US). But what about causation in the opposite direction – from election outcomes to economic performance? It turns out that the US economy grows faster – indeed, performs better by almost every metric – when a Democratic president occupies the White House.
Public opinion on immigration: Has the recession changed minds?
Timothy J Hatton07 June 2014
In the recent European Parliament elections, right-wing populist parties made significant gains. Commentators have linked the rise of these parties to growing anti-immigration sentiment in the wake of the crisis. This column examines the extent to which public opinion has in fact shifted against immigration. Survey data shows that there was no Europe-wide surge in anti-immigration opinion between 2006 and 2010, although there was a marked change in Spain, Greece, and Ireland. This suggests that populist parties’ success cannot be attributed to anti-immigration sentiment alone.
The design of international institutions is shaped by a fundamental trade-off; governance is pushed down with one hand and pulled up with the other. An intermediate outcome, a world divided into diverse polities, is the best that we can do.
Incumbent politicians have a host of advantages in US elections; members of the US Congress are typically re-elected about 90% of the time. This column argues that such a head start can often be bad for the country, with leaders focusing on short-term populist policies rather than the greater good. It suggests raising the bar for incumbent candidates.
Incumbents in the US House of Representatives or US Senate are extraordinarily successful when they seek re-election. Depending on the office-holder's ability and time horizon, this can be a good or bad thing for the country’s voters.
Fair and balanced after all? The bias of the US press
Riccardo Puglisi, James M. Snyder, Jr.01 September 2011
Is the US media biased? According to a controversial new book, it is – and, perhaps surprisingly, to the left. This column takes a different analytical approach and argues that the press is actually much closer to the average voter’s sentiments than we might think. Might all these claims that the media is biased in one direction or the other be adding a whole new set of distortions?
Citizens typically obtain information about relevant policy issues via the mass media. Moreover, they might make judgements about the relative importance of issues – whether crime or the economy is the most important problem facing society, for example – by comparing the relative amount of media coverage issues receive, otherwise known as “agenda-setting” (McCombs and Shaw 1972).
The standard efficiency argument in favour of democracy is based on the idea that free elections are an effective instrument for ousting inept and corrupt politicians (e.g. Sen 2000). This view, however, is based on the assumptions that voters are capable of monitoring and evaluating government actions.
Why globalisation might have started in the eighteenth century
Paul Sharp16 May 2008
Economic globalisation is a political phenomenon. This column presents new evidence on the Anglo-American wheat trade in the eighteenth century and explains how politics, war, and natural disasters thwarted economic integration.
It is well known that the world was impressively economically integrated by the end of the nineteenth century. In fact, some economic historians refer to this period as “the first globalisation.” The traditional explanation for this integration focuses on technological improvements that removed barriers to trade, as steam replaced sail and railroads began to ease long distance transportation. New evidence suggests, however, that there was a potential for globalisation a century earlier.
Kevin Hjortshøj O’Rourke, Ronald Findlay10 March 2008
Globalisation is fundamentally political, not technological. This is the lesson from a new book tracing 1000 years of international trade history. Here the authors use lessons from the past to identify challenges for globalisation in the 21st century.
To many seasoned observers of the world economy, today’s globalisation is a largely technological phenomenon.1 Once learned, new technologies are typically not forgotten, which is why globalisation can seem an irresistible force, destined to bind us ever more tightly together for the foreseeable future. History, however, suggests that globalisation is as much a political as a technological phenomenon, which can thus be easily reversed, and has been so in the past.