Why did the electorate swing between parties during the Great Depression?

The Democratic Party's electoral success during the 1930s has long intrigued politicians and scholars. To gain new insight into that success, this paper examines the striking heterogeneity in county-level support for Roosevelt. Even though the Depression's effects and the New Deal's benefits were famously widespread, only some parts of the country responded with large and durable partisan shifts. One reason is that several factors, including pre-New Deal economic hardship, Dust Bowl conditions, and New Deal spending, appear to have had effects that were largely transitory (i.e., faded by 1940). A complementary reason is that swing electorates can, and did, swing both ways. By contrast, several other variables – notably economic and demographic factors discussed in the previous literature – are related to relatively durable shifts. Finally, heterogeneity in marginal responses may have mattered greatly to national-level Democratic success. By demonstrating which factors were transitory and which were more durable, this paper illuminates the New Deal Realignment and, more generally, the influence of economic conditions and distributive policy on voter behavior.     

What caused Japan’s Great Stagnation in the 1990s? Evidence from an estimated DSGE model

Despite the widespread belief that Japan’s “Great Stagnation” in the 1990s is due to the financial dysfunction after the collapse of asset price bubbles, Hayashi and Prescott (2002) argue that its main cause is a slowdown in total factor productivity growth, using a calibrated neoclassical growth model. The present paper aims to fill this gap by estimating a New Keynesian dynamic stochastic general equilibrium model augmented with a financial accelerator mechanism and associated financial shocks. Our estimation results show that even in the presence of the financial shocks an adverse neutral technology shock mainly induced the Great Stagnation and that the rate of neutral technological change is strongly correlated with all enterprises’ financial position in the Tankan. Based on these findings, the paper argues that the Great Stagnation was caused by an adverse neutral technology shock that is likely to represent a tightening of firms’ financing, which induced reduction of R&D investment and misallocation of resources as indicated in previous literature.     

Decomposing the U.S. Great Depression: How important were loan supply shocks?

We measure the contributions of loan supply shocks and other macroeconomic shocks to U.S. output dynamics during the Great Depression. Using structural vector autoregressions, we impose sign restrictions to identify shocks. We find that loan supply shocks contributed negatively to output growth between 1931 and 1933, at the same time as the U.S. experienced several waves of banking crises. Thus, our results support the view that disruptions in credit availability contributed to the depth and length of the Great Depression. We also find that adverse aggregate demand and monetary policy shocks were important factors in the downturn.     

The stability of German export demand equations – have German exports suffered from the strength of the euro?

Since its introduction in 1999, the euro has shown pronounced swings against the US dollar and the British pound. In this study, we investigate whether this evolution has affected bilateral German exports to two of its major export destinations: the US and the UK. Applying the autoregressive distributed lags bounds testing approach, we find different elasticities of trade between the two export destinations. Our results show that the export demand equation for the US seems to be more stable than that for the UK. Furthermore, it seems that the short-run dynamics in particular have changed.     

Revisiting Sweden’s response to the Great Depression of the 1930s: economic policy in a regional context

This intra-Scandinavian comparison provides a corrective to existing comparative literature on Sweden's response to the Great Depression at three levels: policy conception, case selection and mode of explanation. The paper's holistic view of economic policy shows that the Swedish response was not just about fiscal policy. A broadly defined Swedish response becomes even less distinctive when compared with its Danish and Norwegian counterparts. The paper makes three points to explain the intra-Scandinavian variation (convergence and divergence). First, the regional-metropolitan context matters. Facing similar international challenges, the three small states developed a defensive reflex by striking domestic compromises, abandoning the gold standard, devaluing their currencies and effecting monetary expansion. Second, the political-economic development experience matters. On one hand, proportional representation entrenched Scandinavian farmers as a critical political force, thus ensuring agricultural protectionism across the region. On the other hand, the cross-national divergence in industrialisation largely shaped industrial policy: Sweden’s relative trade and domestic liberalism sharply contrasted with Denmark’s exchange controls and Norway’s import substitution. Third, ideology matters. Whereas the Danish Social Democrats’ traditional liberalism and their Norwegian counterparts’ radicalism buttressed fiscal orthodoxy, the Swedish Social Democrats’ ideational and programmatic renewal paved the way for the fiscal experiment of the crisis years.     

Which firms benefit the most from agglomeration? New evidence from an emerging country with consistent measure of productivity

Productivity influences of agglomeration for developed countries has been well documented so far, however, the studies are still rare for emerging and developing countries, especially ones focusing on firm heterogeneity. This article empirically investigates the effects of agglomeration on productivity using firm-level data from Vietnam – a typical emerging country. Firstly, the consistent productivity measure of each individual firm is yielded using the control function approach along with the instrumental variable procedure. Next, it is regressed on proxies of agglomeration, controlling firm and regional characteristics. Potential issues of self-selection and endogeneity are dealt with using the fixed effects technique and taking advantage of micro data. Findings show the productivity-enhancing influences of employment density and industrial diversity but no clear evidence on the productivity gains from specialization for a general firm. In addition, the most advantaged firms in highly agglomerated regions are proved to be foreign-owned, small-sized, or young. Finally, several sensitivity checks demonstrate that the estimated results are robust across various productivity measures, industrial levels, and samples.     

Feeding the motherland: grain exports from the Swedish Baltic provinces during the Great Famine of 1696–1697

The research carried out so far has explained the Great Famine of 1696–1697 in the Baltic provinces as a result of the total crop failures in 1695–1696 and an inadequate Swedish economic policy that emptied all the stocks in the provinces through massive grain exports to Finland and Sweden. However, both these views are not consistent with the closer study of the grain exports from the major ports of the Baltic provinces during the famine years. The analysis of Tallinn's customs books shows that the grain exports occurred only on a small scale compared to the normal years, due to the strict ban on grain exports to foreign markets. Furthermore, there is no proof that the markets in the bigger towns lacked available grain in those years. It can also be concluded that the volume of the grain exports was hardly enough to alleviate the famine crisis in Finland or Sweden.     

Cameron’s information disaster in the referendum of 2016: an exit from Brexit?

The BREXIT referendum of June 23, 2016, represents a rather surprising decision by the UK electorate and it is a historical result with implications for the UK, Europe and the world economy. It can be shown that a major information blunder by the Cameron government forms part of the explanation of the referendum result: The 16 page info brochure that government sent out to households did not contain a single key finding of the Treasury study on the economic effects of EU membership on the UK and the cost of BREXIT, respectively. While prior to the Scottish referendum of 2014 the Cameron government conveyed key economic insights to households, before the BREXIT vote the government did not give the Treasury’s finding that a 10 % output loss was to be expected as a long run BREXIT effect – had households obtained this information, the referendum would have been 52 % in favor of Remain. Thus there is a new, very convincing argument for a second referendum. Also, US perspectives are emphasized.     

Do oligopolistic firms benefit from being forced to act non-strategically?

The present study seeks to answer the question of whether acting non-strategically can benefit firms. In a static Cournot framework, if a subset of firms are constrained to the equilibrium level of output, being non-strategic will have no impact on profits of neither constrained nor strategic firms and provided that sufficiently large number of firms are restricted, a marginal quantity contraction can be to their benefit. In contrast, using a dynamic Cournot framework, we find that the constraint set at the equilibrium level or moderately deviated from it, leads to increased profits for all firms irrespective of the number of non-strategic ones.     

Surviving the Famine Unscathed? An Analysis of the Long‐Term Health Effects of the Great Chinese Famine

We study the long‐term health effects of the Chinese Famine of 1959–1961 on five cohorts of individuals exposed to it at different stages of their early lives. Based on a 2011 national survey, we use instrumental variables to estimate the impact of the Famine on various health and lifestyle indicators for the whole sample and for the female and male subsamples separately. We have found some negative effects of Famine exposure: (i) for the whole sample, Famine exposure reduced adult height for two out of five cohorts; (ii) for both the female and the male subsamples, Famine exposure reduced adult height in one cohort; and on the whole the reduction was larger for males. We have also found in the subsample that Famine exposure was associated with (i) a higher risk of having hypertension in one cohort for females; (ii) a higher likelihood of smoking in one male cohort; and (iii) a higher probability of consuming alcohol in one cohort for males. Finally, we have not found a statistically significant association between Famine exposure and the risk of being overweight or underweight, having diabetes or other chronic diseases, having depression.     

Did the Great Recession Affect Fertility? Examining the Impact of Job Displacements on the Timing of Births in the United States

We examine the impact of job losses during the Great Recession on fertility in the United States. We find that for married/cohabiting couples, job losses of males during the recession decreased the likelihood of birth. In contrast, job losses of married/cohabiting females had no impact, on average, on fertility because of opposing age-specific effects. Although younger women were reducing fertility after job losses to cope with the loss of income, older women, aged 40 and above, were more likely to have a child following their job loss. Moreover, we find that job losses of single/noncohabiting females decreased the likelihood of birth, particularly for women below the age of 25. This negative effect on fertility persisted in the medium-term, up to three years following the job losses. Overall, these results suggest that job losses during the recession may be partly responsible for the recent decline in the U.S. birth rates.     

Lessons from the global financial crisis – the case of Mainland China and Hong Kong

Abstract

The analysis of the intertwined reactions of Hong Kong and Mainland China to the 2008 Global Financial Crisis is considered in this study through the lenses of their stock markets. The GARCH-based analysis of stock market performance over the period December 2011–December 2014 shows that trade and equity sectors were the sectors most affected by the global recession; volatility was prevalent on the Shanghai stock market, whereas volatility persistence characterised the Hong Kong stock market. The results also show that the two stock markets recovered quite quickly. Tight controls applied by the financial authorities helped ensure some stability during the crisis.     

Was industrialization an escape from the commodity lottery? Evidence from Italy, 1861-1939

The specialization in exporting primary products is frequently deemed harmful for long-run development, because it increases volatility of terms of trade and thus the number and frequency of macroeconomic shocks. One would expect modern economic growth to solve the problem by changing the composition of trade. This paper tests this hypothesis with a new series of Italian terms of trade from 1861 to 1939, a period which spans the first stage of the industrialization of the country. The results do not tally with the hypothesis. The change in composition improved marginally the terms of trade, but it did not help much in terms of volatility.     

Was Expansionary Monetary Policy Feasible during the Great Contraction? An Examination of the Gold Standard Constraint

The recent consensus view that the gold standard was the leading cause of the worldwide Great Depression 1929-1933 stems from the two propositions: (1) Under the gold standard, deflationary shocks were transmitted between countries and, (2) for most countries, continued adherence to gold prevented monetary authorities from offsetting banking panics and blocked their recoveries. In this article we contend that the second proposition applies only to small open economies with limited gold reserves. This was not the case for the United States, the largest country in the world, holding massive gold reserves. The United States was not constrained from using expansionary policy to offset banking panics, deflation, and declining economic activity. Simulations, based on a model of a large open economy, indicate that expansionary open market operations by the Federal Reserve at two critical junctures (October 1930 to February 1931; September 1931 through January 1932) would have been successful in averting the banking panics that occurred, without endangering convertibility. Indeed had expansionary open market purchases been conducted in 1930, the contraction would not have led to the international crises that followed.     

How is the Asian economy recovering from COVID-19? Evidence from the emissions of air pollutants

This study examines how economic and social activities in Asia were affected by the COVID-19 pandemic, using the emissions of various air pollutants as representative measures of those activities. Our review of emissions data suggests that the amount of air pollutants emitted decreased in most subnational regions from 2019 to 2020. We also determined that economic and social activities have restarted in some regions in many countries. Moreover, we conduct regression analyses to identify the types of regions that restarted earlier. Regional characteristics are distinguished by employing a remotely sensed land cover dataset and OpenStreetMap. Results reveal that in the case of the Association of Southeast Asian Nations (ASEAN) forerunners, economic and social activities in cropland, industrial estates, accommodations, restaurants, education, and public services have not yet returned to previous levels.     

Why is the forecast error of quarterly GDP in Japan so large? – From an international comparison of quarterly GDP forecast situation

We examined the accuracy of prediction of Canada, Japan, United Kingdom, and United States from the viewpoint of forecast errors. Compared with the forecast error of each country at the around same time, the forecast error of Japan is about 2 times larger. In case of Japan, even immediately before release of quarterly GDP, the forecast error is over 1 %, which is the same level of forecast error as 94 days before in the United States and 135 days before in Canada.Evaluating the characteristics of forecast errors, it can be pointed out that Japan's forecasts are as efficient as those of other countries, and the addition of major economic statistics is unlikely to improve forecast errors. The reason for Japan's large forecast errors is the fluctuations in the GDP growth rate. These results provide evidence that volatile GDP may make the outlook worse.Large fluctuations in Japan's quarterly GDP have already been pointed out. It is necessary to examine the factors behind the large fluctuations in the rate of change in Japan's quarterly GDP.