a note on foreigners trading and price effects across firms abstract we study the investment behavior of foreign investors in association with an equity market liberalization and find a strong link between foreigners trading and local market returns in the period following the liberalization net purchases by foreign investors induced a permanent increase in stock prices suggesting that local firms reduced their cost of equity capital we also find a strong link between a firm s fraction of foreign ownership and the magnitude of the cost reduction foreign investors seem to prefer large and well known firms and these firms realize the largest reduction in capital cost furthermore our analysis suggests that foreigners increase their net holding in firms that have recently performed well analyzing foreigners performance we find very little evidence of informed trading suggesting that risk sharing is the most plausible explanation for the reduction of the cost of equity capital

the nonlinear relationship between terrorism and poverty in spite of the common wisdom that poverty breeds terrorism in their meta study gassebner and luechinger 2011 report that the two robust explanatory variables for terrorism are population and various measures of democratic freedom but not per capita gdp their results from 13 4 million different regressions estimated using various combinations of the 65 variables contained in 43 different studies indicate no significant causal effects between terrorism and per capita gdp we add to the large and growing literature on the relationship between terrorism and poverty in two ways first unlike previous studies we use a dataset that decomposes the number of terrorist acts into domestic and transnational incidents we show that poverty has a very distinct effect on each type of terrorism second we use split sample and smooth transition regression star estimation techniques to allow for a nonlinear relationship between terrorism and poverty when we account for the nonlinearities in the data and distinguish between the two types of terrorist events we find that poverty has as a very strong influence on domestic terrorism and a small but significant effect on transnational terrorism

education poverty and terrorism is there a causal connection the paper investigates whether there is a connection between poverty or low education and terrorism we review evidence on hate crimes which are closely related to terrorism the occurrence of hate crimes is largely independent of economic conditions we analyze data on support for attacks against israeli targets from public opinion polls conducted in the west bank and gaza strip support for violent attacks does not decrease among those with higher education and higher living standards the core contribution of the paper is a statistical analysis of the determinants of participation in hezbollah militant activities having a living standard above the poverty line or a secondary or higher education is positively associated with participation in hezbollah we also find that israeli jewish settlers who attacked palestinians in the west bank in the early 1980s were overwhelmingly from high paying occupations although our results are tentative and exploratory they suggest that neither poverty nor education has a direct causal impact on terrorism

capital inflows financial structure and housing booms we use a panel var to study the effect of shocks to capital inflows which are identified using sign restrictions on the housing market in oecd countries to explore how effects of these shocks change with the structure of the mortgage market and the degree of mortgage securitization we allow the var coefficients to vary with mortgage market characteristics our results indicate that capital inflow shocks have a significant and positive effect on real house prices real credit available to the private sector and real residential investment the responses of these variables are stronger in countries with more developed mortgage markets and in countries where securitization is allowed

demand curves for stocks do slope down new evidence from an index weights adjustment weights in the toronto stock exchange 300 index are determined by the market values of the included stocks public floats in november 1996 the exchange implemented a previously announced revision of its definition of the public float this revision which increased the floats and the index weights of 31 stocks conveyed no information and had no effect on the legal duties of shareholders affected stocks experienced statistically significant excess returns of 2 3 percent during the event week and no price reversal occurred as trading volume returned to normal levels these findings support downward sloping demand curves for stocks an obvious event with which to examine the slope of demand curves for stocks is one that changes supply in the absence of new information a shift in supply should not affect stock prices if demand curves for stocks are flat scholes 1972 using a sample of secondary equity distributions asks whether stocks are unique works of art or merely abstract claims to residual cash flows with many close substitutes as is assumed in much of finance theory scholes finds that the negative price impact of secondary offerings depends on the seller s identity implying the revelation of unfavorable informationand rules out a pure supply effect mikkelson and partch 1985 also using a sample of registered and unregistered secondary offerings find weak evidence of downward sloping demand curves but are unable to cleanly distinguish this explanation from the alternative explanation based on unfavorable information a different class of events additions to widely followed stock market indexes ostensibly provides a setting where information effects should not be present shleifer 1986 documents a permanent price increase for stocks

lines in the sand price dispersion across iraq s intranational borders before during and after the surge abstractthis paper tests the impact of a change in security commitment on market development in a country embroiled in low intensity conflict we analyze weekly price data for approximately 250 goods from 18 iraqi cities between 2005 and 2008 our paper suggests four empirical regularities associated with price dispersion and market development in postwar iraq first the degree of intracountry price dispersion in iraq is higher than that reported for a typical industrialized nation second the degree of price dispersion decreased significantly during 2007 coincident with the change in u s security strategy known as the surge third the economic impact of the surge is geographically uneven but loosely follows patterns of u s deployment with price dispersion decreasing by roughly one third in areas targeted during the surge but remaining relatively static in other areas finally we find that internal ethnoreligious divisions have relatively modest effects on price dispersion

do institutional factors influence cross border portfolio equity flows new evidence from emerging markets abstract we exploit a proprietary database containing foreign trading data from 20 stock exchanges for the 2006 2018 period to expand the existing evidence on cross border equity flows towards emerging markets in particular after briefly assessing the relevance of push and pull factors we study whether explicit and implicit barriers to investment corporate governance standards and market structure features influence cross border equity inflows we find that pull factors are an important determinant of foreign inflows while push factors have a smaller influence more importantly we find that removing explicit barriers to investment and adopting stricter corporate governance practices has a long run positive relation with inflows conditional on push and pull factors removing information barriers also matters but relatively less market structure features have instead little influence on cross border flows towards emerging markets

momentum investment strategies portfolio performance and herding a study of mutual fund behavior this study analyzes the extent to which mutual funds purchase stocks based on their past returns as well as their tendency to exhibit herding behavior i e buying and selling the same stocks at the same time the authors find that 77 percent of the mutual funds were momentum investors buying stocks that were past winners however most did not systematically sell past losers on average funds that invested on momentum realized significantly better performance than other funds the authors also find relatively weak evidence that funds tended to buy and sell the same stocks at the same time copyright 1995 by american economic association

keynesian government spending multipliers and spillovers in the euro area the global financial crisis has led to a renewed interest in discretionary fiscal stimulus advocates of discretionary measures emphasize that government spending can stimulate additional private spending the keynesian multiplier effect thus we investigate whether the spending package announced by euro area governments for 2009 and 2010 is likely to boost gdp by more than one for one because of modelling uncertainty it is essential that such policy evaluations be robust to alternative modelling assumptions and parameterizations we use five different empirical macroeconomic models with keynesian features such as price and wage rigidities to evaluate the impact of the fiscal stimulus four of them suggest that the planned increase in government spending will reduce private consumption and investment significantly only a model that largely ignores the forward looking behavioural response of consumers and firms implies crowding in of private spending we review a range of issues that may play a role in the recession of 2008 2009 implementation lags are found to reinforce crowding out and may even cause an initial contraction zero bound effects may lead the central bank to abstain from interest rate hikes and increase the gdp impact of government spending crowding in however requires an immediate anticipation of at least two years at the zero bound using a multi country model we find that spillovers between euro area countries are negligible or even negative because direct demand effects are offset by the indirect effect of a euro appreciation new keynesian dynamic stochastic general equilibrium dsge models provide a strong case for government savings packages announced with sufficient lead time spending cuts induce a significant short run stimulus and crowding in of private spending tobias cwik and volker wieland

the economics of terrorism this paper treats terrorism as an economic phenomenon as a way to understand it and to control it it uses the tools of substitution innovation and cycles and concludes by noting the importance of intelligence and that the most valuable approach to defeating terrorism is that of denying resources to the terrorists rather than attempting to protect assets at risk it notes that we are probably not any safer than before the implementation of the post 9 11 strategies and emphasizes that new initiatives must be undertaken to prevent terrorist use of weapons of mass destruction

immigration policy and counterterrorism abstract in a developing country terrorists recruit and allocate their capital skilled labor and unskilled labor between domestic and foreign targets domestic targets require less skilled labor than foreign targets under various strategic scenarios we show how countermeasures against the different terrorist inputs alter the amount and mix of targets as well as how skilled and unskilled immigration quotas by a targeted foreign country affect this mix of attacks we find that increases in skilled labor quotas generally reduce terrorist attacks in the foreign country especially when the terrorists reside in a skill scarce country a number of different strategic scenarios including leader follower are investigated

environmental performance in socially fragmented countries social fragmentation is often associated with reduced co operative behaviour which undermines public goods provision such as environmental protection the few studies linking social fragmentation and environmental performance have been confined to using ethnic fractionalisation as the only measure of social heterogeneity in this paper we contribute to the literature in a twofold manner first we bring into the analysis alternative measures of social fragmentation i e religious fractionalisation ethnic religious polarisation that have received considerable attention in development economics in recent years second this is the first study to our knowledge that makes use of a large panel dataset of several environmental indicators to explore links between ethnic religious diversity and the environment we find that all indices of social fragmentation are negatively linked to measures of environmental quality although for some of them the size of the effect is larger in the case of polarisation

from great depression to great credit crisis similarities differences and lessons the great depression of the 1930s and the great credit crisis of the 2000s had similar causes but elicited strikingly different policy responses while it remains too early to assess the effectiveness of current policy it is possible to analyse monetary and fiscal responses in the 1930s as a natural experiment or counterfactual capable of shedding light on the impact of current policies we employ vector autoregressions instrumental variables and qualitative evidence for 27 countries in the period 1925 39 the results suggest that monetary and fiscal stimulus was effective that where it did not make a difference it was not tried they shed light on the debate over fiscal multipliers in episodes of financial crisis they are consistent with multipliers at the higher end of those estimated in the recent literature and with the argument that the impact of fiscal stimulus will be greater when banking systems are dysfunctional and monetary policy is constrained by the zero bound miguel almunia agustin benetrix barry eichengreen kevin h o rourke and gisela rua

exploiting the chaos terrorist target choice following natural disasters this article explores the differences between transnational and domestic terrorism further differentiating by private versus government targets to estimate the effect of exogenous catastrophic shocks on a country s level of domestic and transnational terrorism the empirical analysis uses detailed data on terrorism natural disasters and other relevant controls for 176 countries from 1970 2007 to illuminate several key disparities in a postdisaster target choice of terrorists the results indicate that natural disasters incite both transnational and domestic terrorism however evidence is found for dissimilar motivations between the two while both types of terrorism increase after disasters transnational attacks against the government increase immediately following the disaster suggesting an impetus to exploit weakened hard targets during the chaos conversely domestic terrorism against the government takes longer to manifest suggesting a period of time for which the public recovers and assesses the government s response

terrorist group survival ideology tactics and base of operations the paper applies survival analysis to identify the determinants of terrorist group duration our sample includes 367 terrorist organizations that operated during 1970 2007 consistent with the theory determinants of these groups survival include their tactics sizes ideological basis regions of operation and base country characteristics cross sectional and panel estimates are reported terrorist organizations fare better if they are larger in size diversify their attack modes are animated by religiosity rather than secular political goals and base their operations in the middle east or africa groups longevity is bolstered by democratic institutions and an intermediate level of ethnic fractionalization at home

daily cross border equity flows pushed or pulled we investigate the conditions under which an intertemporal equilibrium model based on investors portfolio decisions can explain the dynamics of high frequency equity flows our model shows that w

exploring the dynamics between terrorism and anti terror spending theory and uk evidence abstract recent years have seen governments restricting civic freedoms and legislating significant increases in spending to combat terrorist activities in this paper we investigate the relationship between anti terror spending and terrorism in line with previous findings in the empirical literature on terrorist activity our game theoretic model of the interaction between a benevolent government and a terrorist organization is suggestive of a non linear relation between terrorism and counter terrorism spending using uk data our empirical markov switching implementation provides evidence in favor of this approach the empirical results also show that the probability of transiting into a state with high terror is smaller if defense spending is high

identifying the interaction between stock market returns and trading flows of investor types looking into the day using daily data abstract this paper introduces a new method for identifying the simultaneity between returns and trading flows the proposed method enables us to identify the intraday interaction using daily data and provides measures of the information content of trading flows and their instantaneous response to public information and information revealed by market prices applying this method to daily data on investor types from the korea stock exchange we find significant intraday bi directional interaction between flows and returns and their latent common drivers altering some of the results of the previous literature based on cholesky assumptions thus we obtain a number of new insights concerning the behavior of investor types

monetary fiscal policy interactions and fiscal stimulus abstract increases in government spending trigger substitution effects both inter and intra temporal and a wealth effect the ultimate impacts on the economy hinge on current and expected monetary and fiscal policy behavior studies that impose active monetary policy and passive fiscal policy typically find that government consumption crowds out private consumption higher future taxes create a strong negative wealth effect while the active monetary response increases the real interest rate this paper estimates markov switching policy rules for the united states and finds that monetary and fiscal policies fluctuate between active and passive behavior when the estimated joint policy process is imposed on a conventional new keynesian model government spending generates positive consumption multipliers in some policy regimes and in simulated data in which all policy regimes are realized the paper reports the model s predictions of the macroeconomic impacts of the american recovery and reinvestment act s implied path for government spending under alternative monetary fiscal policy combinations

poverty political freedom and the roots of terrorism this article provides an empirical investigation of the determinants of terrorism at the country level in contrast with the previous literature on this subject which focuses on transnational terrorism only i use a new measure of terrorism that encompasses both domestic and transnational terrorism in line with the results of some recent studies this article shows that terrorist risk is not significantly higher for poorer countries once the effects of other country specific characteristics such as the level of political freedom are taken into account political freedom is shown to explain terrorism but it does so in a non monotonic way countries in some intermediate range of political freedom are shown to be more prone to terrorism than countries with high levels of political freedom or countries with highly authoritarian regimes this result suggests that as experienced recently in iraq and previously in spain and russia transitions from an authoritarian regime to a democracy may be accompanied by temporary increases in terrorism finally the results suggest that geographic factors are important to sustain terrorist activities this abstract was borrowed from another version of this item

structural breaks dynamic correlations and hedge and safe havens for stock and foreign exchange markets in greater china this study investigates the dynamic relationship and hedging strategy between stock and foreign exchange markets in greater china for the period 22 july 2005 to 30 november 2015 using the dcc garch model with and without structural breaks the results provide strong evidence of negative time varying correlations between these two markets in greater china consistent with the stock oriented models of exchange rates moreover adding structural breaks reduces the degree of volatility persistence for all considered markets and can provide more accurate hedge and safe haven properties of the us dollar against greater china stock markets the findings have several important implications for portfolio risk managers international investors and policymakers

big fish in small ponds the trading behavior and price impact of foreign investors in asian emerging equity markets this paper analyzes a new dataset for the aggregate daily trading of all foreign investors in six asian emerging equity markets and provides two new findings first foreigners flows into several markets show positive feedback trading with respect to global as well as domestic equity returns the nature of this trading suggests it is due to behavioral factors or foreigners extracting information from recent returns rather than portfolio rebalancing effects second the price impacts associated with foreigners trading are much larger than earlier estimates the results suggest that foreign investors and external conditions have a larger impact on emerging markets than implied by previous work

does terrorism work this paper examines whether terrorism is an effective tool for achieving political goals by exploiting geographic variation in terror attacks in israel from 1988 to 2006 we show that local terror attacks cause israelis to be more willing to grant territorial concessions to the palestinians these effects are stronger for demographic groups that are traditionally right wing in their political views however terror attacks beyond a certain threshold cause israelis to adopt a less accommodating position in addition terror induces israelis to vote increasingly for right wing parties as the right wing parties move to the left in response to terror hence terrorism appears to be an effective strategy in terms of shifting the entire political landscape to the left although we do not assess whether it is more effective than non violent means

do domestic investors have an information advantage evidence from indonesia using transaction data from the jakarta stock exchange i find three pieces of evidence which indicate that domestic investors have an information advantage over foreign investors first foreign investors systematically buy at higher and sell at lower intra day prices than domestic investors second foreign investors tend to sell prior to large positive returns finally the permanent impact of foreign purchases is smaller than that of domestic purchases over time prices at which foreign investors trade have worsened while foreign selling prior to positive returns has disappeared

ethnicity and conflict an empirical study this paper examines the impact of ethnic divisions on conict the empirical specication is informed by a theoretical model of conict esteban and ray 2011 in which equilibrium conict is related to just three distributional indices of diversity ethnic polarization ethnic fractionalization and a greenberg gini index constructed across ethnic groups our empirical ndings verify that these distributional measures are signicant correlates of conict the underlying theory permits us to use these results to make inferences about the relative importance of public goods in conict as well as the extent of within group cohesion in conictual activity these eects are further strengthened as we introduce country specic measures of group cohesion and the relative importance of public goods and combine them with the distributional measures exactly as specied by the theory

the cost of living and terror does consumer price volatility fuel terrorism do fluctuations of consumer prices prompt terrorist activity a latent assumption among conflict scholars is that price volatilities for basic consumer goods produce hardships for people that increase popular grievances damage government legitimacy and raise the chances for terrorism in this study i use a series of regression estimations to test volatility in consumer price indices for energy housing and foods as predictors of domestic and transnational terrorism in a cross section of countries i produce several findings first food price fluctuations are significant predictors of multiple measures of terrorism while energy and housing prices are not second rapid food price increases not decreases promote terrorist attacks third the relationship between food price volatility and terrorism is most consistently present in nondemocratic and hybrid political regimes and in medium human development countries rather than in democracies or in countries characterized by very high or very low economic development

rise and fall in the third reich social advancement and nazi membership abstract we explore the relationship between nazi membership and social advancement using a unique and highly detailed dataset of the german military during the third reich we find that membership of a nazi organisation is positively related to social advancement when measured by the difference between fathers and sons occupations however we find that this observed difference is mainly driven by individuals with different characteristics self selecting into these organisations rather than from a direct reward to membership this result is supported by an instrumental variable approach that uses the location of catholic priests sympathetic to the nazis as an instrument for nazi membership in addition we explore the determinants of nazi membership we find that ns membership is associated with higher socio economic background and human capital levels in line with occupational choice models of radicalisation

poverty and civil war revisiting the evidence abstract previous research has interpreted the correlation between per capita income and civil war as evidence that poverty is a main determinant of conflict in this paper we find that the relationship between poverty and civil war is spurious and is accounted for by historical phenomena that jointly determine income evolution and conflict in particular the statistical association between poverty and civil wars disappears once we include country fixed effects also using cross section data for 1960 to 2000 we find that once historical variables like european settler mortality rates and the population density in 1500 are included in civil war regressions poverty does not have an effect on civil wars these results are confirmed using longer time series from 1825 to 2000

information content of options trading volume for future volatility evidence from the taiwan options market abstract this study follows the approach of ni et al ni s x pan j poteshman a m 2008 volatility information trading in the option market journal of finance 63 1059 1091 based upon the vega weighted net demand for volatility to determine whether volatility information exists within the taiwan options market our empirical results show that foreign institutional investors possess the strongest and most direct volatility information which is realized by the delta neutral options futures trades in addition a few individual investors less than 1 of individuals trades might be informed and realize their volatility information using the strangle strategy surprisingly we find no evidence to support the predictive ability of the volatility demand from straddle trades despite the widespread acknowledgement that such trades are sensitive to volatility

fiscal policy in an expectations driven liquidity trap we study the effects of fiscal policy interventions in a liquidity trap in a model with nominal rigidities and an interest rate rule in a liquidity trap caused by a self fulfilling state of low confidence higher government spending has deflationary effects that reduce the spending multiplier when the zero lower bound is binding instead cuts in marginal labor tax rates are inflationary and become more expansionary when the zero lower bound is binding these findings contradict popular views about the effects of fiscal policy in a liquidity trap

the empirical relationship between commitment enhancement devices and terrorism abstractan extant theoretical literature attributes the high lethality of violent extremist religious sects verss to their comparative advantage in assembling coalitions of highly committed operatives and identifies sacrifice and stigma s s and social service provision ssp as the primary commitment enhancement devices verss employ however lack of direct measures of the verss deployment of these devices has impeded efforts to test the hypothesized effects of s s and ssp on terrorism this article exploits the relationship between exogenous variation in the marginal productivities of s s and ssp as inputs in the production of commitment and variation in verss employment of these inputs to identify proxies for s s and ssp using data from 158 countries our cross sectional estimates of the effects of s s and ssp on the impact of terrorism are significant and larger than the effects of geographic and political variables that are consistently reported to be both significant and substantial

the political effectiveness of terrorism revisited terrorists attack civilians to coerce their governments into making political concessions does this strategy work to empirically assess the effectiveness of terrorism the author exploits variation in the target selection of 125 violent substate campaigns the results show that terrorist campaigns against civilian targets are significantly less effective than guerrilla campaigns against military targets at inducing government concessions the negative political effect of terrorism is evident across logit model specifications after carefully controlling for tactical confounds drawing on political psychology the author concludes with a theory to account for why governments resist compliance when their civilians are targeted

common drivers of transnational terrorism principal component analysis i introduction ever since the skyjackings of four wide bodied planes on september 11 2001 henceforth 9 11 economists have displayed a strong research interest in terrorism theoretical and empirical papers have investigated myriad aspects of terrorism for example the economic consequences of terrorism the impact of terrorism on economic development the root causes of terrorism and the effectiveness of counterterrorism policies see the literature survey by enders and sandier 2012 this research has derived some guiding principles first the macroeconomic consequences of terrorism are generally quite small and of a short term nature for most economies like crime terrorism is anticipated to have a local influence because property damage is typically limited and few people die on average 420 people lost their lives annually from transnational terrorist attacks since 1968 sandier arce and enders 2009 second large diversified economies are particularly able to endure terrorism with minimal repercussions as economic activities transfer from terrorism prone to safer sectors third small developing countries are more inclined to suffer adverse economic effects from terrorism keefer and loayza 2008 fourth in cross sectional and panel regressions transnational terrorism has had a small but significant impact on economic growth blomberg hess and orphanides 2004 gaibulloev and sandler 2008 2011 tavares 2004 fifth the root cause of terrorism is not poverty gassebner and luechinger 2011 kmeger and maleckova 2003 piazza 2011 unpopular foreign policy decisions appear to be a significant cause of transnational terrorism savun and phillips 2009 sixth actions to protect against specific types of terrorist attacks e g metal detectors in airports to curb skyjackings or to guard specific kinds of targets e g government officials result in terrorists substituting into other modes and targets of attacks brandt and sandler 2010 enders and sandler 1993 seventh terrorism can influence the outcome of national elections gassebner jong a pin and mierau 2008 gassebner and luechinger 2011 the primary purpose of this article is to apply modern principal component analysis to identify common worldwide and idiosyncratic country specific factors that influence transnational terrorism involving two or more countries our main goal is to identify any co movement of transnational terrorism across countries which has not been previously investigated principal component analysis is a statistical method to estimate the most influenced common stochastic series by analyzing cross sectional correlation for our particular application principal component analysis identifies if there are influences that commonly or generally affect the dynamic co movement of transnational terrorist attacks in the sample countries if one or more common factors are estimated then we relate these factors to the transnational terrorist attacks in the sample countries to ascertain whether some countries transnational terrorist campaigns drive attacks worldwide principal component analysis also indicates which countries transnational terrorism is driven by considerations specific to them and thus independent of attacks occurring abroad such countries likely confront perpetrators who are not driven by grievances ideologies or resources shared with groups abroad hence the notion of idiosyncratic factors the principal component analysis here finds a single common factor for transnational terrorism during 1970 2007 which we then relate by our methodology to the transnational terrorist campaigns in some specific countries in fact all co movements of transnational terrorism across countries are explained by just five countries transnational terrorist attacks among them lebanon s transnational terrorist attacks explain most of the worldwide co movement of transnational terrorism with the other four countries united states germany iraq and the united kingdom explaining the remainder

the roles of foreign aid and education in the war on terror this paper presents a theoretical framework and some empirical results showing that the level of foreign aid received reduces the supply of terrorist attacks by recipient countries as does the recipient country s level of education due account is taken of endogeneity problems in producing these results they suggest that western democracies which are the main targets of terrorist attacks should invest more funds in foreign aid with a special emphasis on supporting education

why suicide terrorists get educated and what to do about it this paper tries to reconcile the observed fact that suicide terrorists have a relatively high education level with rationality it brings out the conditions under which potential students choose to acquire some education in a rational choice model where this yields a non zero probability of blowing up the resulting human capital in a terrorist attack the comparative statics of the rational expectations equilibrium of this model demonstrate how economic development on the one hand and repression on the other hand might reduce terrorism under some parameter restrictions

can cultural norms reduce conflicts confucianism and peasant rebellions in qing china abstract can culture mitigate conflicts triggered by economic shocks in light of the extraordinary emphasis that confucianism places on subordination and pacifism we examine its role in possibly attenuating peasant rebellion within the historical context of china circa 1651 1910 our analysis finds that while crop failure triggers peasant rebellion its effect is significantly smaller in counties characterized by stronger confucian norms as proxied by confucian temples and chaste women this result remains robust after controlling for a long list of covariates and instrumenting confucian norms using ancient confucian sages 500 b c a d 550 to address concerns of measurement error and reverse causality

flight to quality and correlation between currency and stock returns abstract we document that capital flows in and out of emerging or developed markets are sensitive to global equity market conditions capital tends to move out of emerging into developed countries in global down markets leading to depreciation appreciation of emerging developed currencies this generates a positive negative correlation between currency and equity in emerging developed markets which is amplified by the magnitude of the capital movement we also verify that hedging currency risks may undo the natural hedge and increase the total return volatility under negative correlation

terrorism and the world economy abstract it has been argued that terrorism should not have a large effect on economic activity because terrorist attacks destroy only a small fraction of the stock of capital of a country see e g becker g murphy k 2001 prosperity will rise out of the ashes wall street journal october 29 2001 in contrast empirical estimates of the consequences of terrorism typically suggest large effects on economic outcomes see e g abadie a gardeazabal j 2003 the economic cost of conflict a case study of the basque country american economic review 93 113 132 the main theme of this article is that mobility of productive capital in an open economy may account for much of the difference between the direct and the equilibrium impact of terrorism we use a simple economic model to show that terrorism may have a large impact on the allocation of productive capital across countries even if it represents a small fraction of the overall economic risk the model emphasizes that in addition to increasing uncertainty terrorism reduces the expected return to investment as a result changes in the intensity of terrorism may cause large movements of capital across countries if the world economy is sufficiently open so international investors are able to diversify other types of country risks using a unique data set on terrorism and other country risks we find that in accordance with the predictions of the model higher levels of terrorist risks are associated with lower levels of net foreign direct investment positions even after controlling for other types of country risks on average a standard deviation increase in the terrorist risk is associated with a fall in the net foreign direct investment position of about 5 of gdp the magnitude of the estimated effect is large which suggests that the open economy channel impact of terrorism may be substantial

how do foreign investors impact domestic economic activity evidence from india and china there has been renewed advocacy for restrictions on international financial flows in the wake of the recent financial crisis motivated by this trend we explore the extent to which cross border flows affect real economic activity unlike previous research efforts that focus on aggregated capital flows we exploit novel data on forced trading by global mutual funds as a plausible source of exogenous flow shocks such forced trading is known to generate large liquidity and price effects but its real impacts have not been studied extensively we find that both country and firm level investment growth rates are significantly affected by these exogenous capital shocks and that their effect is more pronounced for firms whose marginal investment decisions are more equity reliant

the euro area government spending multiplier at the effective lower bound abstract we build a factor augmented interacted panel vector autoregressive model of the euro area ea and estimate it with bayesian methods to compute government spending multipliers the multipliers are contingent on the overall monetary policy stance captured by a shadow monetary policy rate whether the fiscal shock occurs when the economy is at the effective lower bound elb or in normal times matters for the size of the multiplier median estimates vary conditional on the specification but the difference between multipliers at the elb and in normal times is systematically positive with very high probability over the medium run 5 years median cumulated multipliers range between 0 3 and 1 4 in normal times and between 1 6 and 2 9 at the elb we show that the results are not driven by the state of the business cycle and that the multiplier is inversely correlated with the level of the shadow monetary policy rate the econometric approach deals with several technical problems highlighted in the empirical macroeconomic literature including the issues of fiscal foresight and limited information

determinants of the demise of terrorist organizations this article investigates the determinants of terrorist groups failure by applying survival analysis in a discrete time specification our sample consists of a diverse set of 586 terrorist groups in which just over 63 end operations demise during 1970 2007 we use rand event data and jones and libicki terrorist group data findings show that the survival of terrorist groups is bolstered by diversifying attacks having multiple home bases locating in the middle east locating in a democratic country and limiting reliance on transnational terrorist attacks moreover larger groups have better survival prospects religious fundamentalist terrorist groups face better survival prospects than other terrorist groups terrorist groups located in a country with larger tropical territory are less likely to end operations however groups based in a landlocked country are more likely to fail

do demand curves for currencies slope down evidence from the msci global index change traditional portfolio balance theory derives a downward sloping currency demand function from limited international asset substitutability historically this theory enjoyed little empirical support we provide direct evidence by examining the exchange rate effect of a major redefinition of the msci international equity index in 2001 and 2002 the index changes implied large changes in the representation of different countries in the msci world index and therefore produced strong exogenous equity flows by index funds our event study shows a strong announcement effect in which countries with a decreasing equity representation vis a vis the u s depreciated against the dollar

do demand curves for stocks slope down since september 1976 stocks newly included into the standard and poor s 500 index have earned a significant positive abnormal return at the announcement of the inclusion this return does not disappear for at least ten days after the inclusion the returns are positively related to measures of buying by index funds consistent with the hypothesis that demand curves for stocks slope down the returns are not related to s p s bond ratings which is inconsistent with a plausible version of the hypothesis that inclusion is a certification of the quality of the stock

downside and upside risk spillovers between exchange rates and stock prices abstract we examined downside and upside risk spillovers from exchange rates to stock prices and vice versa for a set of emerging economies we characterized the dependence structure between currency and stock returns using copulas and computed downside and upside value at risk and conditional value at risk we documented a positive relationship between stock prices and currency values in emerging economies with respect to the us dollar and the euro with downside and upside spillover risk effects transmitted both ways finally we also documented asymmetries in upside and downside risk spillovers and asymmetric differences in the size of risk spillovers when the domestic currency values against the us dollar and the euro our results consistent with flight to quality phenomena have implications for downside and upside risk management of international investor portfolios in emerging markets

the economics of counterterrorism a survey we provide a review of theoretical and empirical contributions on the economic analysis of terrorism and counterterrorism we argue that simple rational choice models of terrorist behavior in the form of cost benefit models already provide a well founded theoretical framework for the study of terrorism and counterterrorism we also hint at their limitations which relate to the failure of accounting for the dynamics between terrorism and counterterrorism that may produce unintended second order effects as well as for the costs associated with counterterrorism and its international dimension we reevaluate previously proposed counterterrorism strategies accordingly finally in the light of our findings we discuss interesting areas of future research

climate shocks state capacity and peasant uprisings in north china during 25 1911 ce china provides an interesting case study of civil conflict because of her long history and rich records using a unique dynastic panel dataset for north china during 25 1911 ce this study finds that severe famines and dynastic age were positively correlated with peasant uprisings whereas government disaster relief as a proxy for state capacity played a significant mitigating role negative climate shocks e g severe drought locust plagues affected peasant uprisings primarily through the channel of severe famines the effects of population density temperature and other climate shocks e g flood levee breaches snow disasters and frost were either not robust or insignificant

estimating fiscal multipliers news from a non linear world we estimate non linear vars to assess to what extent fiscal spending multipliers are countercyclical in the us we deal with the issue of non fundamentalness due to fiscal foresight by appealing to sums of revisions of expectations of fiscal expenditures this measure of anticipated fiscal shocks is shown to carry valuable information about future dynamics of public spending results based on generalised impulse responses suggest that fiscal spending multipliers in recessions are greater than one but not statistically larger than those in expansions however non linearities arise when focusing on extreme events that is deep recessions versus strong expansionary periods

income inequality redistribution and domestic terrorism abstract we analyze the effect of income inequality on terrorism for a sample of 113 countries between 1984 and 2012 we provide evidence robust to various methodological changes e g the use of instrumental variable approaches that higher levels of income inequality are associated with more domestic terrorism analyzing the underlying transmission channels we find that this effect is in parts due to the ill effects of income inequality on institutional outcomes e g corruption which in turn motivate domestic terrorism we also investigate whether redistributional efforts can be effective in reducing terrorist activity we find that countries that redistribute more see less domestic terrorism in parts because redistribution improves institutional conditions in light of this latter finding we discuss the implications of our analysis for policymakers who want to counter domestic terrorism through redistributive policies