National politics and bank default risk in the eurozone

We study the impact of national politics on default risk of eurozone banks as measured by the stock market-based Distance to Default. We find that national electoral cycles, the power of the government as well as the government’s party ideological alignment significantly affect the stability of banks in the eurozone member countries. Moreover, we show that the impact of national politics on bank default risk is more pronounced for large as well as weakly capitalized banks.     

Political stability and trade agreements: Evidence for ‘endgame FTAs’

This paper empirically examines the idea that Free Trade Agreements (FTAs) are more likely to be signed by governments playing ‘endgames’; that is, when governments are about to lose power. Two empirical strategies shed light on this hypothesis. One relies on events that increase the probability of political turnover, the other on term limits. I find that countries are more likely to sign FTAs after the unexpected exit of their leaders, when political instability is high. The key finding is partly confirmed in the term-limits strategy as governments are found to form more FTAs during their last term in office.     

Positive welfare effects of trade barriers in a dynamic partial equilibrium model

We develop a simple two-region, cobweb-type dynamic partial equilibrium model to demonstrate the existence of optimal, possibly non-zero, trade barriers. A pure comparative statics analysis of our model suggests that a reduction of trade barriers, modeled as small but positive import tariffs, always enhances welfare. However, taking a dynamic perspective reveals that nonlinear trade interactions between two regions may generate endogenous price fluctuations which can hamper welfare. Finally, we allow special interest groups, such as consumers or producers from these two regions, to lobby for a particular level of trade barriers. Our model predicts that time-varying trade barriers may be another channel for market instability.     

Public sector enterprise disinvestment in India: Efficiency gains in a political context

India instituted a program of state enterprise disinvestment in 1991 as part of a sweeping reform initiative. This study analyses the effect of disinvestment on enterprise performance, conditioned on political context as characterized by the ideological leanings of the parties in power at state and central levels. Using stochastic frontier analysis, measures of firm efficiency are generated for 238 central public sector enterprises for the period 1991–1992 to 2010–2011. The relationship between efficiency so measured and disinvestment is then estimated using a two-stage instrumental variables approach to control for endogeneity between firm efficiency and selection for disinvestment. Initial disinvestment is associated with substantial efficiency gains, but subsequent disinvestment much less so and the proportion of shares disinvested only loosely so. This may be explained by the transformative effect of initial stock market listing on accountability and profit orientation that is not repeated with further rounds of disinvestment. The effect of disinvestment on performance is stronger if the enterprise is located in a state governed by a right leaning party or one that is ideologically aligned with the party in power at the centre.     

How historical analogies in newspapers of five countries make sense of major events: 9/11, Mumbai and Tahrir Square

We analyze how historical analogies are used in the media to make sense of novel events. While earlier work focused on single case studies, this is the first quantitative analysis comparing historical analogies invoked in three events in newspapers from five countries. With very high intercoder reliability we found 881 invocations of historical analogies. We found an interesting contrast between the roles of historical analogies in foreign policy decision making vs. newspaper articles. When the task is advocacy for policy choice, a compelling historical analogy will be one in which the causal mechanisms are as similar as possible to the current situation so that similar actions are likely to lead to similar results. Instead, newspapers spend more time at the early stages of sense-making and help the audience understand just a few features of the current situation. Newspapers thus offer a much broader range of historical analogies without much regard to maximizing similarity.     

“Been-heres vs. come-heres” and other identities and ideologies along the rural–urban interface: A comparative case study in Calaveras County,California

The rural–urban interface is the place of transition between that which we call “urban” and that which we call “rural.” The interface is situated between two places perceived to be different, but which are indelibly linked. Although the functional differences between “rural” and “urban” people (or those seen as “been-heres” versus “come-heres”) seem to be diminishing, differing perspectives and preferences persist along the rural–urban edge. Such differences influence the way that land users, decision makers, and the community manage the environment and react to landscape change. Using a comparative case study in Calaveras County, California, I examine the differences and similarities between “been-heres” and “come-heres” along several lines: basic demographic characteristics, political party affiliations and ideologies, and conceptions of private property rights, concluding that the dichotomy is false but instructive. The been-here/come-here divide, rather than being a definitive means for characterizing stakeholders or predicting their behavior or perspectives, serves as a heuristic for understanding the starting places of certain actors. Furthermore, this kind of analysis reveals not only where and how people and perspectives contrast but also the ways that they converge. Improving our understandings differing people and perspectives is especially important as decision-makers struggle to plan for and manage livable places and sustainable environments among groups with varying preferences which may sometimes conflict.     

Managing political imperatives in war time: strategic responses of Philips in Australia, 1939–1945

The Australian subsidiary of Dutch multi-national enterprise Philips came under secret service surveillance and faced risk of government takeover as enemy property during World War II. It was also excluded from Australian government contracts for war-related communications equipment at a time when it was forced to reduce civilian production. These threats to its assets and operations required the firm to develop an adaptive corporate strategy in order to respond to the political imperatives it faced; not just minimising political risk, but also taking advantage of the opportunities that war-related production offered during the war years and after.     

The tourism and peace nexus

Tourism has been heralded as a contributor to peace, however, the inconclusive findings of empirical studies render the need for a consolidation of theory that has in so far relied on case studies and the adoption of the contact hypothesis. Informed by political science theory, this paper proposes a methodological framework that can guide future research and aims to serve as a benchmark for researchers interested in temporal issues pertaining to conflict, peace and tourism. Signalling a departure from the simplistic notion that contact through travel contributes to social integration, the paper adopts a holistic conceptualisation of the multi-faceted and complex system of actors, sectors and dimensions of tourism spanning at the social, economic, political and environmental levels.     

Political uncertainty and a firm's credit risk: Evidence from the international CDS market

Using a large sample of firms with single-name credit default swap (CDS) contracts in 30 countries, we document the evidence that political uncertainty, proxied by national election dummy, is positively related to firm-level credit risk. Specifically, this positive relation is more pronounced for the firms that have no political connection or poor international diversification, and in the countries with higher political uncertainty and lower investor protections. Further, by using a difference-in-differences approach, we find evidence to support idiosyncratic volatility and debt rollover channels through which political uncertainty affects the credit risk of individual firm.     

DETERMINANTS OF SOVEREIGN BONDS RATINGS: A ROBUSTNESS ANALYSIS

Several studies have attempted to deduce the determinants of sovereign bond ratings. In this study, Extreme Bounds Analysis is applied to approximately 30 factors proposed by the literature in order to assess their robustness with a focus on the relative importance that economic and political variables receive in the shaping of the ratings. We find that policies that constrain the public sector are among the most robust. Variables such as rule of law, openness to economic flows, central bank independence, and market friendly policies are found to be more robustly correlated with the ratings than foreign reserves, fiscal deficit, sovereign bond yields, and economic growth.