politicians and protection tariffs and elections in australia an index of manufacturing industry tariff protection is calculated for each australian federal electoral division and used to test for the presence of voting factors in the electoral incidence of tariff protection there is a strong positive relationship between the level of tariffs and the labor vote in an electorate though this is more likely to be evidence for the effect of levels of manufacturing activity than for systematic electoral manipulation of tariffs smaller samples of electorates do suggest that governments shift the largest tariff increases into electorates which they won at the previous election

the walking debt crisis abstract this article sheds light on the question whether arising sovereign credit risk in the emu has been triggered by the us subprime crunch by adapting recent econometric methodologies suggested in the related field of speculative bubbles we find clear evidence for fast diverging and even explosive behavior of emu government bond yields of peripheral countries relative to germany during the financial and the european debt crisis this might be caused by flight to quality effects to german government bonds coincident with the collapse of lehman brothers and by a loss of confidence in the fiscal stability of greece ireland italy portugal and spain during the european debt crisis first we find compelling evidence for bubbles in the dow jones equity real estate investment trusts reits index which serves as a weekly measure of economic activity in the north american real estate sector second in our main analysis we test whether the collapsing bubble in the housing market triggered the diverging government bond yields during two crisis regimes our findings indicate that this was the case in the course of the financial crisis but not during the emu sovereign debt crisis these results suggest that the severe fiscal problems in peripheral countries are homemade rather than imported from the us

spillovers through banking centers a panel data analysis of bank flows abstract this paper presents evidence that spillovers through bank lending contributed to the transmission of currency crises during the recent episodes of financial instability in emerging markets the innovation of the paper is that it looks beyond aggregated measures of contagion into the structure of bank flows disaggregating by banking centers the main findings are that spillovers caused by banks exposures to a crisis country help predict flows in third countries after the mexican and asian crises but not after the russian crisis in the latter there is evidence of a generalized outflow from emerging markets the importance of spillovers through banking centers suggests that countries might reduce contagion risk by diversifying the sources of their financing and by carefully monitoring borrowing from creditors exposed to potential crisis countries

international financial contagion in currency crises abstract this paper examines the role of financial linkages especially through a common creditor in the propagation of emerging market crises during the 1990s using panel probit regressions on 41 emerging market countries it finds that financial linkages played a significant role in the spread of the mexican asian and russian crises the significance of financial linkages emerges after controlling for the role of domestic and external fundamentals trade spillovers and financial weaknesses in the affected countries a strong financial linkage to the crisis country of origin not only substantially raises the probability of contagion but also helps to explain the observed regional concentration of currency crises

financial contagion and attention allocation this paper explains financial contagion between two stock markets with uncorrelated fundamentals by fluctuations in international investors attention allocation we model the process of attention allocation that underlies portfolio investment in international markets using investors who face information processing constraints investors optimally allocate more attention to a region hit by a financial crisis to the detriment of other markets the resulting endogenous increase in uncertainty causes a reduction in the capacity to bear risks by international investors that induces them to liquidate their positions in all risky assets hence there is a collapse in stock prices around the world we show that the degree of non anticipation of a crisis is crucial for the existence of contagion using data from the east asian crisis and the number of news stories about thailand in the financial times relative to news stories about argentina brazil and chile as a proxy for the relative attention allocated to the asian stock market we find evidence consistent with two key predictions of our model first the higher the volatility of the originator market the more relative attention allocated to this market and second the more relative attention allocated to the originator market the higher the volatility of the other markets our findings support the attention reallocation channel as a transmission mechanism of financial crises between regions during the period from january 1997 to july 1998

econometric issues in the analysis of contagion this paper presents a canonical econometric model of contagion and investigates the conditions under which contagion can be distinguished from inter dependence in a two country market set up it is shown that for a range of fundamentals the solution is not unique and for sufficiently large values of the contagion coefficients it has interesting bifurcation properties with bimodal density functions the extension of the model to herding behaviour is also briefly discussed to identify contagion effects in the presence of inter dependencies the equations for the individual markets or countries must contain country market specific forcing variables this sheds doubt on the general validity of the correlation based tests of contagions recently proposed in the literature which do not involve any country market specific fundamentals finally we show that ignoring inter dependence can introduce an upward bias in the estimate of the contagion coefficient and using monte carlo experiments we further show that this bias could be substantial

a new approach to modeling early warning systems for currency crises can a machine learning fuzzy expert system predict the currency crises effectively abstract this paper presents a hybrid causal model for predicting the occurrence of currency crises by using the neuro fuzzy modeling approach the model integrates the learning ability of the neural network with the inference mechanism of fuzzy logic the empirical results show that the proposed neuro fuzzy model leads to a better prediction of crisis significantly the model can also construct a reliable causal relationship among the variables through the obtained knowledge base compared to neural network and the traditionally used techniques such as logit the proposed model can thus lead to a somewhat more prescriptive modeling approach based on determinate causal mechanisms towards finding ways to prevent currency crises

measuring sovereign risk spillovers and assessing the role of transmission channels a spatial econometrics approach abstract we contribute to the literature on international risk spillovers by developing a unified framework based on spatial econometrics that enables us to address the following questions i what are the effective transmission channels real linkages and informational channels of international risk spillovers across countries and or regions ii what are the most dominant ones and iii which countries are most at risk for their environment and which are suffering the most from international exposure our analysis based on 41 advanced and emerging economies from 2008q1 to 2012q4 shows that among the considered channels for explaining international spillovers of sovereign bond spreads the informational channel is of utmost importance our results challenge previous findings from the literature in which the empirical strategy did not accommodate altogether important features of country spillovers such as the co existence of multiple transmission channels in the presence of contemporaneous and time lagged interactions ultimately our stress testing analysis reveals important insights on countries prone either to international spillovers international exposure or both at the regional and the worldwide level

on crises contagion and confusion abstract since the tequila crisis of 1994 1995 the asian flu of 1997 and the russian virus of 1998 economists have been busy producing research on the subject of contagion yet few studies have examined empirically through which channels the disturbances are transmitted if there are indeed fundamental reasons for the spillovers we observe we attempt to fill this gap by analyzing how both trade links and the largely ignored financial sector links influence the pattern of fundamentals based contagion we examine the role of international bank lending the potential for cross market hedging and bilateral and third party trade in the propagation of crises

unprotective tariffs ineffective liberalization and other mysteries an investigation of the endogenous dimensions of trade policy formation in australia 1 introductionsince its formation as a federation in 1901 australia embraced a fairly comprehensive tariff schedule in relation to imported manufactures 1 tariff rates fluctuated considerably over the years however over the course of the century they remained sufficiently high to earn australian manufacturing the reputation of one of the most heavily protected manufacturing sectors in the industrialized world 2 in recent years a number of liberalization waves have surfaced the most notable of these took place in 1973 1977 1988 1991 and most recently in 1994 with the signing of the uruguay round of the gatt agreement still tariffs remain a principal actor in australia s menu of industrial policies in a recent edition of the annual report of the productivity commission 3 published in november 1999 it is noted that although tariffs have dropped considerably since 1994 they remain an important form of assistance tariff assistance still accounts for around 90 of measured effective assistance to the manufacturing sector 4 p 52 given the pervasiveness of australian tariff policy the significant welfare implications of changes in that policy and the particular importance of international trade for this country ensuing from its idiomorphic cultural resource endowment and geographic characteristics 5 considerable research effort has been invested in the examination of various dimensions of this issue at the forefront of pertinent empirical research two items have attracted considerable interest 1 the host of determinants of the highly dispersed tariff concessions and 2 the impact of liberalization on imports research that falls in the category that examines the former including anderson 1980 conybeare 1984 aislabie 1988 and feaver and wilson 1998 is consistent at varying degrees with the theory of endogenous trade policy formation 6 according to the foundations of this theory tariff concessions may be viewed as public outcomes that facilitate a political equilibrium the mechanics are rather elementary when the profit loss that arises from import competition exceeds the transaction cost of a successful lobbying campaign for protection private interests will undertake such lobbying activities the higher the loss from foreign competition the more fervent the lobbying effort hence an increase in import penetration is likely to trigger greater protection7 trefler 1993 p 139 unlike this line of inquiry the critical causal relationship of interest to studies that fall in the category that investigates item 2 including simmons and smith 1994 relates to the effects of tariff changes on imports rather than the reverse the causal directions of the nature examined by studies that investigate issues 1 and 2 are of course not mutually exclusive higher import penetration increases tariffs and higher tariffs in turn decrease import penetration however despite the simultaneity of these variables studies of australia s trade policies associated with research lines 1 and 2 followed separate paths by only considering unidirectional causal relationships and yet these paths do converge the meeting point perplexing results on the one hand studies of endogenous protection such as anderson 1980 and aislabie 1988 have consistently failed to establish the expected result that an increase in import penetration will lead to higher tariffs on the other studies of trade liberalization often find that tariff reduction shave asurprisingly small effect on imports with a study by simmons and smith 1994 concluding that at least in relation to the examined industry removal of the tariff would have no effect on the level of imports p 57 it is important to note that analogous and equally puzzling findings pertaining to improbably smalle ffect so fliberalization on imports have been identified in the caseofothercountries suchastheunitedstates byanumberofauthors

financial integration and international business cycle co movement international business cycle transmission through integrated financial markets occurs through wealth and balance sheet effects balance sheet effects lead to business cycle convergence but wealth effects lead to divergence this paper shows empirically that debt market integration has a positive effect on co movement implying that balance sheet effects are the main conduit for international transmission through integrated debt markets equity market integration has a negative effect implying that wealth effects are the main channel for international transmission through integrated equity markets distinguishing between wealth and balance sheet effects resolves some key discrepancies between empirical and theoretical findings in international macroeconomics

measuring common cyclical features during financial turmoil evidence of interdependence not contagion abstract this paper develops a test of contagion in financial markets by considering a measure of co movement based on the notion of common cycles to detect short run co movements between a set of time series we apply our methodology to the international effects of the 1994 mexican peso crisis and the 1997 asian crisis our results can be interpreted as evidence of a high level of market co movement during all states of the world and therefore question the hypothesis of shift contagion in the transmission of financial shocks during the 1997 asian crisis and to a lesser extent the 1994 mexican crisis

relative risk aversion and the transmission of financial crises we study how investor behavior affects the transmission of financial crises if investors exhibit decreasing relative risk aversion then negative wealth shocks increase the risk premium required to hold risky assets we integrate this into a second generation model of currency crises which allows for contagion through changes in fundamentals investor behavior can be a transmission channel of financial crises as changes in risk premia increase the coverage ratio and makes the defense of a peg less attractive for the policy maker the feedback effect of the risk premia on the probability of devaluation also makes multiple equilibria more likely the possible stabilization effects of capital controls and a tobin tax on the international transmission of financial crises are also studied

the architecture of globalization a network approach to international economic integration we combine data on international trade linkages with network methods to examine the global trading system as an interdependent complex network we map the topology of the international trade network and suggest new network based measures of international economic integration at both a global system wide level and a local country level we develop network based measures that incorporate not only the volume of trade but also the influence that a country has on the international trading system these measures incorporate the structure and function of the network and may provide a more meaningful approach to globalization than current measures based on trade volumes we find that in terms of participation and influence in the network global trade is hierarchical with a core periphery structure at higher levels of trade though integration of smaller countries into the network increased considerably over the 1990s the network is strongly balkanized according to geography of trading partners but not as strongly by income or legal origin using these new measures we find that a country s position in the network has substantial implications for economic growth we therefore suggest that a network approach to international economic integration has potential for useful applications in international business finance and development

contagion effects of sovereign credit rating revisions on the real economy is it trade or finance we analyse the contagion effects of sovereign credit rating revisions on the real economy with particular emphasis on the intensity of trade and finance channels our findings show that event coun

the economics of special interest politics the case of the tariff this paper investigates the interaction of politicians and special interest lobbies the goal is to model the equilibrium levels of redistributive policies such as taxes subsidies tariffs and regulatory decisions the model is applied throughout to the setting of tariffs by contributing to political campaigns special interest lobbies generate economic returns higher tariffs generate revenue for import competing industries through higher product prices higher milk support prices raise dairy farm income and so forth the lobby invests to maximize these net economic returns in evaluating their chances of election politicians weigh the favorable effects of special interest money against the unfavorable association with the lobby and the social cost of the redistributive policy section i explores the lobby s problem it describes a formalization of mancur olson s discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns section ii describes determination of the equilibrium tariff positions of each politician in a political campaign

dynamic information spillovers in intraregionally focused spot and forward currency markets abstract this paper proposes an intraregionally focused tri currency modeling framework to investigate dynamic information spillovers across spot and forward exchange rate markets in frontier and emerging country currencies for both price levels and volatilities empirical estimates of structural parameters were obtained using an mgarch mskst model that incorporated the term structure of non deliverable forward ndf and deliverable forward df markets the dominance of regional currencies and the influence of differing forward contract maturities 1 3 6 and 12 months the currencies for nine countries were grouped into three regions northeast asia china korea and taiwan south southeast asia india indonesia and philippines and latin america brazil chile and columbia the currency for each selected country was evaluated within the regionally determined tri currency system we found that ndf markets play a dominant role over df markets with regard to price discovery during periods of tranquility during periods of crisis both ndf and df markets exhibit a more balanced impact on currency market price discovery mechanisms in addition distinct differences were observed across regions currencies in northeast asia were shown to be affected by the chinese renminbi during periods of crisis and the indian rupee could be regarded as the dominant currency in south southeast asia no robust results were obtained with regard to the dominance of currencies in latin america finally our results also suggest important distinctions between the effect of various instrument maturities on ndf and df market returns with df returns being more responsive to longer maturities 6 months and 12 months during tranquil periods ndf returns are more responsive to shorter maturities but during crisis periods this effect is diminished

regionality revisited an examination of the direction of spread of currency crises abstract what determines the direction of spread of currency crises we examine data on waves of currency crises in 1992 1994 1997 and 1998 to evaluate several hypotheses on the determinants of contagion we simultaneously consider trade competition financial links and institutional similarity to the ground zero country as potential drivers of contagion to overcome data limitations and account for model uncertainty we utilize bayesian methodologies hitherto unused in the empirical literature on contagion in particular we use the bayesian averaging of binary models that allows us to take into account the uncertainty regarding the appropriate set of regressors we find that institutional similarity to the ground zero country plays an important role in determining the direction of contagion in all the emerging market currency crises in our dataset we thus provide persuasive evidence in favour of the wake up call hypothesis for financial contagion trade and financial links may also play a role in determining the direction of contagion but their importance varies amongst the crisis periods

the synchronization of credit cycles abstract this paper proposes a simple econometric procedure to test for the synchronization of credit cycles using a century of data for 14 advanced economies we find that credit cycle synchronization dropped in the early 1920s from initially relatively high levels between the 1920s and the 1970s synchronization was overall low and concentrated within five predominantly regional clusters however synchronization has significantly increased in the post bretton woods era and has become less associated with geographic proximity australia denmark france italy japan norway spain switzerland the uk and the us form a single major credit cycle cluster since the 1970s a smaller cluster is formed by canada the netherlands and sweden while the german credit cycle follows a distinct path using logistic regressions we find that the synchronization of credit and business cycles go hand in hand our findings are especially relevant for the international coordination of macroprudential policy as well as to spur and inform further analysis on credit cycle dynamics

how resilient and countercyclical were emerging economies to the global financial crisis during the crises of the 1990s emerging economies usually lacked the policy tools to deal with external shocks that were available to advanced economies worldwide turbulent episodes found most emerging economies unable to perform countercyclical policies and in many cases their own vulnerabilities and poor institutional frameworks amplified negative external shocks leading to sharper recessions this paper shows that the 2008 2009 global financial crisis represents a structural break in the way emerging economies conduct their policies with more countercyclical policies pursued before and during the global crisis moreover breaking with the past emerging economies did not fall more than developed economies during the global financial crisis thus becoming more similar to developed economies the resilience of emerging economies during the 2008 2009 crisis might be partly attributed to a combination of sounder macroeconomic and financial policy frameworks with a shift towards safer domestic and international financial stances

internal debt crises and sovereign defaults internal and sovereign debt crises occur together and happen more frequently in economies with weak bankruptcy institutions this paper provides a novel explanation internal crises arise because of the inability to liquidate private debtors when many default in an optimal contract a successful entrepreneur repays yet an unsuccessful one defaults and liquidates his assets the bounds on liquidation generate however a second equilibrium where domestic borrowers default because others are also defaulting during these coordinated defaults tax collections fall which increases sovereign default risk in the model joint debt crises are an optimal response to informational problems in private sector lending

explaining and forecasting bank loans good times and crisis abstractthis article aims to develop a parsimonious model to explain and forecast bank loans to nonfinancial companies during calm periods as well as in situations of financial turmoil it focuses on the french context over a period including financial banking and sovereign debt crises theoretical views and intuitions led us to gauge the marginal informational content of a large set of leading indicators in var and vecm models and to investigate potential nonlinearity in credit dynamics in accordance with firms and banks balance sheet effects the growth rate of equity prices appears to be one of the most interesting leading indicator as well as a significant threshold variable for explaining regime switching however it appears difficult to accurately predict the right credit dynamics regimes a simple var model finally performs better

the falsification of four popular hypotheses about the asian crisis various claims have been made about the causes of the asian crisis and its spread here we use data on the behaviour of capital flows during the crisis to test the strong forms of four such hypotheses that portfolio investors and hedge funds played a dominant role in initiating and or spreading the crisis that moral hazard kept efficient markets from predicting the crisis and finally the common lender hypothesis of kaminsky and reinhart in the process we also test implications of the calvo mendoza model of rational investor ignorance all are falsified as monocausal explanations for example portfolio investments that could not have been subject to substantial moral hazard continued to flow into asia until very shortly before the crisis likewise banks were a much larger source of capital outflows during the crisis than were portfolio investors while falsified in their strongest forms several of these hypotheses in less strong forms should play a role in a more nuanced analysis it is necessary to move past simple single factor approaches in order to produce a more complete synthetic explanation of this episode

interbank contagion at work evidence from a natural experiment this article tests financial contagion due to interbank linkages for identification we exploit an idiosyncratic sudden shock caused by a large bank failure in conjunction with detailed data on interbank exposures first we find robust evidence that higher interbank exposure to the failed bank leads to large deposit withdrawals second the magnitude of contagion is higher for banks with weaker fundamentals third interbank linkages among surviving banks further propagate the shock finally we find results suggesting that there are real economic effects these results suggest that interbank linkages act as an important channel of contagion and hold important policy implications jel g01 g21 g28 e58 since the onset of the financial turmoil increased uncertainty reflected particularly in counterparty risk has led banks to hoard liquidity this has resulted in a significant decline of trading in the interbank money markets jean claude trichet president of the european central bank december 2008

asset market linkages in crisis periods we characterize asset return linkages during periods of stress by an extremal dependence measure contrary to correlation analysis this nonparametric measure is not predisposed toward the normal distribution and can allow for nonlinear relationships our estimates for the g 5 countries suggest that simultaneous crashes between stock markets are much more likely than between bond markets however for the assessment of financial system stability the widely disregarded cross asset perspective is particularly important for example our data show that stock bond contagion is approximately as frequent as flight to quality from stocks into bonds extreme cross border linkages are surprisingly similar to national linkages illustrating a potential downside to international financial integration

agricultural technology productivity and poverty in madagascar summary this paper uses a unique spatially explicit dataset to study the link between agricultural performance and rural poverty in madagascar we show that controlling for geographical and physical characteristics communes that have higher rates of adoption of improved agricultural technologies and consequently higher crop yields enjoy lower food prices higher real wages for unskilled workers and better welfare indicators the empirical evidence strongly favors support for improved agricultural production as an important part of any strategy to reduce the high poverty and food insecurity rates currently prevalent in rural madagascar