bilateral trade and shocks in political relations evidence from china and some of its major trading partners 1990 2013 abstract an extensive number of studies investigate the effects of political relations on trade by estimating a gravity model using annual or quarterly data we argue that the use of low frequency data introduces an aggregation bias because the cycle of moderate political shocks is much shorter measured in weeks using monthly data from 1990 through 2013 for china we estimate a model of political relations and conclude that political shocks are short lived narrative evidence from two case studies illustrates the transitory nature of these shocks a var model shows that although political shocks influence exports to china the effects largely vanish within two months a comparison of the monthly and annual frequency gravity equation regressions illustrates the effects of temporal aggregation

withholding consumption a social dilemma perspective on consumer boycotts this article draws on social dilemma theory and reference group theory to understand the individual boycott decision and tests the predictions stemming from this conceptualization in two experiments consistent with our predictions consumers likelihood of participating in both economic and social issue boycotts is jointly determined by their perceptions of the boycott s likelihood of success their susceptibility to normative social influences and the costs they incur in boycotting consumers success perceptions are in turn determined by their expectations of overall participation and efficacy as well as the message frame inherent in proboycott communications two key determinants of consumers boycotting costs are their preference for the boycotted product and their access to its substitutes more specifically consumers who are more susceptible to the normative influence exerted by the reference group of potential boycotters are more influenced by expected overall participation rates in their boycott likelihood

conflict cooperation and commerce the effect of international political interactions on bilateral trade flows the public choice approach to political economy is employed to gain insight into the connection between international politics and trade flows a model is constructed in which importers are assumed to be rational utility maximizers who seek to satisfy international security as well as economic welfare objectives this model of bilateral trade flows reflects contemporary theory in the field of international economics and it explicitly incorporates the general foreign policy orientation of importers among its determinants the model is tested in 16 annual crosssectional estimations 1960 75 for a complete network of 25 countries the findings show considerable support for the hypothesis that trade flows are significantly influenced by broad political relations of amity and enmity between nations the author concludes that nations adjust trade ties to satisfy security as well as economic welfare goals and that a formal political economy of trade should reflect this fact

does crude oil price play an important role in explaining stock return behavior abstract employing the ms arji gjr garch x model in which the parameters for the jump process the asymmetric garch effect and the impacts of oil price shocks are regime dependent this paper analyzes the impact of crude oil price shock on stock return dynamics empirical results reveal three interesting findings first incorporating the asymmetric garch effect and the oil price shock can substantially improve fitting ability second the garch and jump components show very different behaviors during turbulent and stable periods third the effects of current and past oil price shocks differ the conditional mean mean of jump size and variance of jump size immediately respond to a current oil price shock a one period lagged oil price shock no matter whether positive or negative can affect the transition probability that the stock market will remain conditional in the next period moreover the effects of lagged positive and negative shocks on transition probabilities are very different

measuring contagion between energy market and stock market during financial crisis a copula approach abstract in this paper we apply time varying copulas to investigate whether a contagion effect existed between energy and stock markets during the recent financial crisis using the wti oil spot price the s p500 index the shanghai stock market composite index and the shenzhen stock market component index returns evidence was found for a significantly increasing dependence between crude oil and stock markets after the failure of lehman brothers thus supporting the existence of contagion in the sense of forbes and rigobon s 2002 definition moreover increased tail dependence and symmetry characterize all the paired markets this indicates that significant increases in tail dependence are an actual dimension of the contagion phenomenon and that crude oil and stock prices are linked to the same degree regardless of whether markets are booming or crashing during the sample period finally the contagion effect is found to be much weaker for china than the us the empirical results have potentially important implications for risk management

does oil move equity prices a global view many studies indicate that oil price shocks have an adverse effect on real output and hence an adverse effect on corporate profits where oil is used as a key input the present study examines whether and to what extent the adverse effect of oil price shocks impacts stock market returns to this end we analyse 35 datastream global industry indices for the period from april 1983 to september 2005 our findings indicate that oil price rises have a negative impact on equity returns for all sectors except mining and oil and gas industries generally these results are consistent with economic theory and evidence provided by previous empirical studies little evidence of any asymmetry is detected in the oil price sensitivities in light of our findings we recommend that international portfolio investors consider hedging oil price risk

intra industry foreign direct investment we use a new firm level data set that establishes the location ownership and activity of 650 000 multinational subsidiaries close to a comprehensive picture of global multinational activity a number of patterns emerge from the data most foreign direct investment fdi occurs between rich countries the share of vertical fdi subsidiaries which provide inputs to their parent firms is larger than commonly thought even within developed countries more than half of all vertical subsidiaries are only observable at the four digit level because the inputs they are supplying are so proximate to their parent firms final good that they appear identical at the two digit level we call these proximate subsidiaries intra industry vertical fdi and find that their location and activity are significantly different to the inter industry vertical fdi visible at the two digit level these subsidiaries are not readily explained by the comparative advantage considerations in traditional models where firms locate their low skill production stages abroad in low skill countries to take advantage of factor cost differences we find that overwhelmingly multinationals tend to own the stages of production proximate to their final production giving rise to a class of high skill intra industry vertical fdi

dynamic cyclical comovements of oil prices with industrial production consumer prices unemployment and stock prices abstract this paper examines the empirical relationship between oil prices and several key macroeconomic variables in particular we investigate the cyclical comovements of crude oil prices with output consumer prices unemployment and stock prices the methodology involves the use of the hodrick prescott hodrick r j prescott e c 1980 post war us business cycles an empirical investigation working paper carnegie mellon university and baxter king baxter m king r g 1999 measuring business cycles approximate band pass filters for economic time series review of economics and statistics 81 575 593 filters as well as the recently developed full sample asymmetric christiano fitzgerald christiano l j fitzgerald t j 2003 the band pass filter international economic review 44 435 465 band pass filter contemporaneous and cross correlation estimates are made using the stationary cyclical components of the time series to make inference about the degree to which oil prices move with the cycle besides documenting a number of important cyclical relationships using three different time series filtering methods the results suggest that crude oil prices are procyclical and lag industrial production additionally we find that oil prices lead consumer prices

macro economy stock market and oil prices do meaningful relationships exist among their cyclical fluctuations this paper examines the relationship among consumer price index industrial production stock market and oil prices in greece initially we use a unified statistical framework cointegration and vecm to study the data in levels we then employ a multivariate var model to examine the relationship among the cyclical components of our series the period of the study is from 1996 1 to 2008 6 findings suggest that oil prices and the stock market exercise a positive effect on the greek cpi in the long run cyclical components analysis suggests that oil prices exercise significant negative influence to the stock market in addition oil prices are negatively influencing cpi at a significant level however we find no effect of oil prices on industrial production and cpi finally no relationship can be documented between the industrial production and stock market for the greek market the findings of this study are of particular interest and importance to policy makers financial managers financial analysts and investors dealing with the greek economy and the greek stock market

co integration and error correction models the temporal causality between government taxes and spending several interesting papers have recently considered whether government taxes granger cause government spending or vice versa the findings based on standard granger 6 causality tests are not consistent manage and marlow 10 conclude that when evidence of one way causality exists federal taxes granger cause federal spending while anderson wallace and warner 1 conclude that the evidence supports one way causality in the opposite direction ram 11 reexamining the issue concludes that taxes granger cause spending at the federal level but that spending granger causes taxes at the state and local level von furstenberg green and jeong 13 in another related article examine the tax and spend spend and tax causality issue using a more general vector autoregressive var model they introduce in addition to federal taxes and spending two economic variables the gnp gap and the inflation rate decompose federal spending into several categories and remove the effects of automatic stabilizers when appropriate they find little evidence that taxes granger cause spending and limited evidence that spending causes taxes a finding which corresponds most closely to that of anderson wallace and warner 1 our purpose is to reconsider the causality issue with the aid of co integration and errorcorrection modeling our analysis illustrates with a specific example how sources of causality can be neglected in standard granger causality tests moreover addressing the question of temporal causality between government taxes and spending provides insight as to how different policies might or might not help control the growth of government the results of our estimating various co integration and error correction models with quarterly data suggest bi directional causality between government taxes and spending both for the federal and state and local sectors this finding counters the conclusions of previous studies when annual data are used however our

connectedness of economic policy uncertainty and oil price shocks in a time domain perspective abstract in this paper we investigate causality and connectedness between economic policy uncertainty and oil price shocks across time scales by incorporating the wavelet approach into the structural vector autoregression var framework proposed by diebold and yilmaz 2009 2012 2014 we find that crude oil prices behave like receivers of information from economic policy uncertainty regardless of time scale however the causality relationship between economic policy uncertainty and oil price shocks intensifies as time scales increase in addition the connectedness relationship is robust to time scale changes whereas the causal relationship intensifies as time scales increase notably the weight of us economic policy uncertainty increases in the var system as time scales increase in particular we employ the west texas intermediate wti crude oil price as an alternative measure to increase the robustness of our results and identify differences in the var system overall the total connectedness of the wti crude oil price is lower than that of the brent crude oil price regardless of time scale our results provide meaningful information for both investors and policymakers

power politics and international trade r recent literature attributes the relative scarcity of open international markets to the prisoner s dilemma structure of state preferences with respect to trade we argue that the prisoner s dilemma representation does not reflect the most critical aspect of free trade agreements in an anarchic international system namely their security externalities we consider these external effects explicitly doing so leads us to two conclusions 1 free trade is more likely within rather than across political military alliances and 2 alliances are more likely to evolve into free trade coalitions if they are embedded in bipolar systems than in multipolar systems using data drawn from an 80 year period beginning in 1905 we test these hypotheses the results of the analysis make it clear that alliances do have a direct statistically significant and large impact on bilateral trade flows and that this relationship is stronger in bipolar rather than in multipolar systems in the early 1970s students of international relations began what would become a long and heated debate about the political correlates of open international markets recently however an important element of consensus has begun to emerge most contributors to this debate now seem to agree that the prisoner s dilemma structure of state preferences with respect to trade explains the relative dearth of open international markets here we argue that what has become the standard prisoner s dilemma representation neglects the most critical aspect of free trade agreements in the anarchic international system namely their security externalities we consider these external effects explicitly in order to do so we construct and analyze a simple game theoretic model the results of this analysis demonstrate that tariff games between allies differ systematically from those played between actual or potential adversaries these differences imply that free trade is more likely within rather than across political military alliances however our analysis also suggests that the evolutionary prospects of alliances vary those that are the products of bipolar systems are more likely to evolve into free trade coalitions than are their multipolar counterparts less credible exit threats and clearer responsibilities for alliance stability explain the advantage of a bipolar system we test this argument using data drawn from an 80 year period beginning in 1905 the empirical analysis supports our argument it demonstrates that alliances have a direct statistically significant and large effect upon bilateral trade moreover it shows that on average alliances have a much stronger effect on trade in a bipolar than in a multipolar world 2

stock returns inflation and real activity in canada this paper finds evidence that as for the united states there exists an inverse relation between real stock returns and inflation i n canada such a relation if nonspurious could signify a nonneutralit y of money the authors causality tests suggest however that inflation does not cause real stock returns instead their empirical results support e f fama s proxy effect hypothesis according to which the observed inverse relation is proxying for fundamental relations between real stock returns and anticipated real activity and between inflation and real activity the authors therefore cannot reject the fisherian hypothesis that variations in anticipated inflation have no effect on real stock returns

the effects of strategic and economic interdependence on international conflict across levels of analysis this study develops a social network analytic approach to conceptualize and measure interdependence across levels of analysis this framework contains several innovations first it integrates sensitivity interdependence the effects of changes in one state on other states with vulnerability interdependence the opportunity costs of breaking a relationship second it measures interdependence at different levels of analysis and across multiple relationships third it integrates multiple dimensions of interdependence into a single measure i derive hypotheses from the realist and liberal paradigms regarding the effects of strategic and economic interdependence on monadic dyadic and systemic conflict these hypotheses are tested via data on alliances military capability and trade the findings provide robust support to the expectations of the liberal paradigm regarding the effects of strategic and economic interdependence on conflict on the other hand the expectations of the realist paradigm are not supported i discuss the theoretical and empirical implications of this approach

does the stock market predict real activity time series evidence from the g 7 countries this paper extends one aspect of the us stock market study of fama 1990 and schwert 1990 we examine the relationship between industrial production ip growth rates and lagged real stock returns for the g 7 countries using both in sample cointegration and error correction models and the out of sample forecast evaluation procedure of ashley et al 1980 the cointegration tests show a long run equilibrium relationship between the log levels of ip and real stock prices while the error correction models indicate a correlation between ip growth and lagged real stock returns for all countries except italy the out of sample tests show that in several sub periods the us uk japanese and canadian stock markets enhance predictions of future ip 1999 elsevier science b v all rights reserved

measuring business cycles a modern perspective in the first half of this century special attention was given to two features of the business cycle 1 the comovement of many individual economic series and 2 the different behavior of the economy during expansions and contractions both of these attributes were ignored in many subsequent business cycle models which were often linear representations of a single macroeconomic aggregate however recent theoretical and empirical research has revived interest in each attribute separately notably dynamic factor models have been used to obtain a single common factor from a set of macroeconomic variables and nonlinear models have been used to describe the regime switching nature of aggregate output we survey these two strands of research and then provide some suggestive empirical analysis in an effort to unite the two literatures and to assess their usefulness in a statistical characterization of business cycle dynamics

stock returns inflationary expectations and real activity this paper tests the fisher hypothesis that real stock returns are independent of inflationary expectations on data for the finnish economy a significant negative relationship is found when stock returns are regressed on the rate of inflation a possible explanation is that higher inflation may proxy a drop in the money demand induced by a lower growth in real activity which simultaneously implies a drop in expected future profits and thus a drop in stock prices to test this hypothesis actual growth in real activity is included in the regression equation for aggregate stock returns significant negative coefficients are however still obtained for expected as well as unexpected inflation it is further shown that these relations are quite insensitive to the specification of the expectations formation mechanism

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

crude oil and the macroeconomy tests of some popular notions a note perhaps no other economic events in the post world war ii era have generated as much attention as the series of crude oil price shocks that have jolted the world economy since the opec boycott of 1973 a tremendous amount of space in the popular and professional literature has been devoted to analyzing the impacts of these shocks on the developed economies and the adjustments these shocks have induced one residual of this literature has been a general impression that since 1973 the functional relationship between crude oil prices and the developed macroeconomies has been dramatically and fundamentally altered yet to our knowledge no one has formally tested this impression recent evidence of hamilton 1983 suggests that crude oil prices had a strong impact on the u s business cycle well before 1973 further while textbook treatments of oil price shocks tend to highlight cost push inflationary effects the research of berndt and wood 1975 1979 and wilcox 1983 indicates the net complementarity between energy and capital in the u s economy is quite strong both before and after 1973 thus oil price shocks may have stronger real effects than generally believed in this paper we formally test three popular notions associated with the so called

the reaction of stock prices to unanticipated changes in money a note much of the past work on the money stock market relationship centered on the question of whether money is a leading indicator of stock prices studies by sprinkel 22 homa and jaffee 10 and hamburger and kochin 8 supported the view that past increases in money lead to increases in equity prices the implication of this work was that investors could earn above normal proflts by using a trading strategy based on the observed behavior of the money stock this contradicts the efficient markets hypothesis which asserts that current asset prices reflect all available information so that no such trading strategy can exist subsequent research by cooper 3 pesando 17 rozeff 21 and rogalski and vinso 19 has shown that past money changes do not contain predictive information on stock prices upholding the efficient markets view this paper investigates whether the response of common stock prices to weekly money announcements is consistent with the efflcient markets hypothesis unlike the above research therefore the focus is on the very short run response of stock prices to both anticipated and unanticipated announced changes in money recent work by berkman 1 grossman 7 urich and wachtel 25 and roley 20 indicates that short term interest rates respond only to the unexpected component of the announcement with short term rates rising when the announced change in money exceeds the expected change berkman also examined the reaction of stock prices finding that an unanticipated increase in the money supply depressed share prices lynge 13 found that positive money announcements lowered stock prices but since he did not distinguish expected from unexpected money growth his results do not bear directly on the efficient markets issue in investigating the response of stock prices to weekly money announcements survey data on market participants forecasts of the announced weekly change

the political determinants of international trade the major powers 1907 1990 we test three arguments about the effect of international politics on trade flows the first argument states that trade flows are greater between states with similar interests than those with dissimilar interests the second that trade flows are greater in democratic dyads than nondemocratic dyads and the third that trade flows are greater between allies we examine trade flows between the major powers from 1907 to 1990 this period provides variation on all three independent variables of interest and allows us to separate the three arguments empirically we estimate a gravity model of trade with the above political variables added our results demonstrate that joint democracy and common interests increase trade in a dyad but alliances generally do not even when controlling for polarity of the system

linking the gas and oil markets with the stock market investigating the u s relationship energy markets can represent a strategic advantage when they are supporting each other and specifically when energy segments are complementary enough to support economic development and growth in this light a high and strategic interest relies on the possible interactions between energy market segments as well as their impact on a given country s financial market the proposed research focuses on the interaction between the u s natural gas and u s crude oil markets on one side and their dependencies with the u s stock market on the other side after controlling for structural changes or breaks we characterize previous dependencies with the multivariate copula methodology first we assess the joint link prevailing between the natural gas and crude oil markets then we characterize the joint risk structure prevailing between previous energy markets and the u s stock market finally we assess the joint dependence structure between the natural gas crude oil and stock markets

hyteresis in import prices the beachhead effect this paper shows that temporary real exchange rate fluctuations can have persistent hysteretic effects on trade specifically when market entry costs are sunk sufficiently large exchange rate shocks alter domestic market structure and thereby induce hysteresis this simple result has strong implications for exchange rate theory t rade policy and estimation of trade equations empirical evidence su ggests that the recent dollar overvaluation induced hysteresis in u s import prices namely the aggregate pass through equation of exchange rates to import prices shifted in the 1980s the shift s nature and timing is broadly consistent with the hysteresis hypothesis copyright 1988 by american economic association

are oil shocks inflationary asymmetric and nonlinear specifications versus changes in regime this paper identifies a structural break in core u s inflation phillips curves such that oil prices contributed substantially before 1981 but since that time pass through has been negligible this characterization is robust to a variety of re specifications and fits the data better than asymmetric and nonlinear oil price alternatives evidence does not support the hypotheses that declining energy intensity or deregulation of energy producing and consuming industries played an important role monetary policy did not itself become less accommodative of oil shocks but may have helped create a regime where inflation is less sensitive to price shocks more generally

paying a visit the dalai lama effect on international trade is political compliance a precondition for healthy trade relations with china the chinese government frequently threatens that meetings between its trading partners officials and the dalai lama will be met with animosity and ultimately harm trade ties with china we run a gravity model of exports to china from 159 partner countries between 1991 and 2008 to test the extent to which bilateral tensions affect trade with autocratic china in particular we investigate empirically whether countries that receive the dalai lama despite china s opposition experience a significant reduction of their exports to china in order to account for the potential endogeneity of meetings with the dalai lama the number of tibet support groups and the travel pattern of the tibetan leader are used as instruments our empirical results support the idea that countries officially receiving the dalai lama at the highest political level are punished through a reduction of their exports to china however this dalai lama effect is only observed for the hu jintao era and not for earlier periods furthermore we find that this effect is mainly driven by reduced exports of machinery and transport equipment and that it disappears two years after a meeting took place

stock returns and output growth in emerging and advanced economies abstract this paper studies the correlation between output growth and lagged stock returns in a panel of emerging market economies and advanced economies it finds that the proportion of countries in which this correlation is significant is the same for emerging market economies as it is for advanced economies using yearly data and somewhat lower using quarterly data asset prices therefore seem to contain valuable information to forecast output also in emerging market economies moreover the paper finds that the strength of the correlation between output growth and lagged stock returns is significantly related to a number of stock market characteristics such as a high market capitalization to gdp ratio and less robustly english legal origin and the number of listed domestic companies and initial public offerings

the dependence and risk spillover between crude oil market and china stock market new evidence from a variational mode decomposition based copula method abstract this paper examines the dependence structure between crude oil market and china stock market over different investment horizons before and after the recent financial crisis by combining the variational mode decomposition vmd method with various static and time varying copulas based on the decomposed time series and the copula dependence the value at risk var conditional var covar and delta covar covar are quantified to analyze the upside and downside risk spillovers from oil market to china stock market in raw short and long run investment horizons before and after the financial crisis the empirical results show that first the recent financial crisis enhances the dependences between the crude oil market and china stock market and the long run dependence increases more significantly than that of short run for the raw return series there are symmetric upper and lower tail dependencies in full sample and pre crisis subsample periods but an average dependence in post crisis subsample period second the var of china stock market increases heavily around the financial crisis but the average var after the crisis deceases compared to the risk before the crisis third the risk spillovers from crude oil price to china stock market are found in each sample periods before the crisis however it mainly exists in long run horizon while after the crisis it happens in both short and long run horizons finally the risk spillovers from oil price to china stock market display strong asymmetric features with larger long term downside risk spillovers in post crisis subsample

dynamic spillovers of oil price shocks and economic policy uncertainty this study examines the dynamic relationship between changes in oil prices and the economic policy uncertainty index for a sample of both net oil exporting and net oil importing countries over the period 1997 01 2013 06 to achieve that an extension of the diebold and yilmaz 2009 2012 dynamic spillover index based on structural decomposition is employed the results reveal that economic policy uncertainty oil price shocks responds negatively to aggregate demand oil price shocks economic policy uncertainty shocks furthermore during the great recession of 2007 2009 total spillovers increase considerably reaching unprecedented heights moreover in net terms economic policy uncertainty becomes the dominant transmitter of shocks between 1997 and 2009 while in the post 2009 period there is a significant role for supply side and oil specific demand shocks as net transmitters of spillover effects these results are important for policy makers as well as investors interested in the oil market

oil price shocks and stock markets in the u s and 13 european countries abstract oil price shocks have a statistically significant impact on real stock returns contemporaneously and or within the following month in the u s and 13 european countries over 1986 1 2005 12 norway as an oil exporter shows a statistically significantly positive response of real stock returns to an oil price increase the median result from variance decomposition analysis is that oil price shocks account for a statistically significant 6 of the volatility in real stock returns for many european countries but not for the u s increased volatility of oil prices significantly depresses real stock returns the contribution of oil price shocks to variability in real stock returns in the u s and most other countries is greater than that of interest rate an increase in real oil price is associated with a significant increase in the short term interest rate in the u s and eight out of 13 european countries within one or two months counter to findings for the u s and for norway there is little evidence of asymmetric effects on real stock returns of positive and negative oil price shocks for oil importing european countries

comparisons of business cycles in the ec idiosyncracies and regularities annual data since 1960 and the real business cycle model as a guidance the evidence suggests that there are remarkable similarities between the business cycle pattern of these countries despite significant differences in the patterns of fiscal and monetary policies and the terms of trade we take this evidence to suggest that the type of shocks and the propagation mechanism is fairly similar across the ec countries hence the process of european integration under a set of uniform institutions and policies should not be a problem as far as the business cycle is concerned

dutch disease economics and oil syndrome an empirical study abstract this paper integrates the existing dutch disease models of an oil boom into a reduced form three sector model and estimates it for five developing oil exporting countries having significant agricultural and manufacturing sectors time series annual data for the period 1966 1986 are used for algeria ecuador indonesia nigeria and venezuela their output composition is altered by an increase in their oil revenues the spending effect and in the world price of manufactured goods relative to agricultural products the world price effect both effects expand the manufacturing sectors of these countries and contract their agricultural sectors the spending effect expands their nontraded sectors whereas the world price effect may expand or contract them the opposite results are implied for the oil collapse of the 1980s

booming sector and de industrialisation in a small open economy this paper presents a theoretical analysis of the dutch disease the phenomenon whereby a boom in one traded goods sector squeezes porfitability in other traded goods sectors both by directly bi

investing in the peace economic interdependence and international conflict research appears to substantiate the liberal conviction that trade fosters global peace still existing understanding of linkages between cone ict and international economics is limited in at least two ways first cross border economic relationships are far broader than just trade global capital markets dwarf the exchange of goods and services and states engage in varying degrees of monetary policy coordination second the manner in which economics is said to inhibit cone ict behavior is implausible in light of new analytical insights about the causes of war we discuss and then demonstrate formally how interdependence can ine uence states recourse to military violence the risk of disrupting economic linkages particularly access to capital may occasionally deter minor contests between interdependent states but such opportunity costs will typically fail to preclude militarized disputes instead interdependence offers nonmilitarized avenues for communicating resolve through costly signaling our quantitative results show that capital interdependence contributes to peace independent of the effects of trade democracy interest and other variables students of world politics have long argued that peace is a positive externality of global commerce theorists like montesquieu and kant and practitioners like woodrow wilson asserted that economic relations between states pacify political interaction mounting evidence in recent years appears to substantiate these claims multiple studies many identie ed with the democratic peace link interstate trade with reductions in militarized disputes or wars 1 while we concur with the evolving

does trade still follow the flag t he economic ties between any two nations are frequently affected by a warming or cooling of bilateral diplomatic relations but there is little to be found in modern economics or political science that helps us understand the connections between international politics and commerce the notion that international economics could be studied in isolation from its political underpinnings or consequences would have been quite alien to mercantilist thinkers in the eighteenth century or to the critics or advocates of imperialism in the nineteenth that economics and politics were inextricably intertwined was taken as a matter of course indeed trade follows the flag was central to these people s understanding of world politics and international economics intellectual trends over the past century radically changed this worldview the ascendancy of liberalism in economic thought brought with it a compartmentalization of disciplines that may now be eroding but we are left with theories of international politics and economics that are very weakly bridged the objective of this study is to map one of the many connections between international politics and commercial ties specifically i seek to identify and measure the effect of changes in state to state diplomatic relations on trade flows between those nations theoretical underpinnings of my effort are in the tradition of public choice political economy frey 1984 because i treat importers as rational utility maximizers and their behavior as determined by preferences pursued within a context of specified constraints the model i put forward is wholly consistent with contemporary neoclassical trade theory but i extend the economists notion of welfare and contend that importers take account not only of the price and quantity of goods and services but of the place of origin of these products and the political relationship between the importing and the exporting nation they do so essentially for traditional security reasons that is importers are motivated to manage their trade relations in ways that minimize risks of disruption in supply or the possibility of hurting friends or

crude oil and stock markets stability instability and bubbles abstract we analyze the long run relationship between the world price of crude oil and international stock markets over 1971 1 2008 3 using a cointegrated vector error correction model with additional regressors allowing for endogenously identified breaks in the cointegrating and error correction matrices we find evidence for breaks after 1980 5 1988 1 and 1999 9 there is a clear long run relationship between these series for six oecd countries for 1971 1 1980 5 and 1988 2 1999 9 suggesting that stock market indices respond negatively to increases in the oil price in the long run during 1980 6 1988 1 we find relationships that are not statistically significantly different from either zero or from the relationships of the previous period the expected negative long run relationship appears to disintegrate after 1999 9 this finding supports a conjecture of change in the relationship between real oil price and real stock prices in the last decade compared to earlier years which may suggest the presence of several stock market bubbles and or oil price bubbles since the turn of the century

the relationship between political tensions trade and capital flows in asean plus three we estimate the effects of political tension on trade and capital flows in asean plus three countries in the framework of a gravity model we quantify political tension through text parsing software reading daily reuters articles from 1990 to 2013 and exclude brunei and laos due to sparsity of news coverage regarding bilateral trade we find that political conflict measured by negative reports in reuters articles seems to only affect bilateral trade between countries that are not both members of the world trade organization wto for these countries a 1 per cent rise in the tension score results in a 0 05 per cent decline in trade there is weaker evidence that improvement in bilateral relationship measured by positive reports in reuters articles is associated with more trade as for capital flows while long term capital flows measured by foreign direct investment appear to be unaffected by short term tensions both a non democratic government and a history of war negatively affect fdi

inflation and growth in a disequilibrium macroeconomic model abstract the purpose of this paper is to study the dynamics of temporary equilibria in a disequilibrium growth model dynamics rests upon adjustment mechanisms of prices capital stock money balances and labour supply wage dynamics is supposed to be influenced by indexation processes and this question is related to the investment behaviour of firms we give sufficient conditions for existence unicity and asymptotic stability of steady states of this model we also show that steady states correspond to a long run phillips curve which is vertical when inflationary expectations are fully reflected in wage and price changes

oil price shocks stock market economic activity and employment in greece abstract using a multivariate vector autoregression var approach this paper attempts to shed light into the dynamic relationship among oil prices real stock prices interest rates real economic activity and employment for greece the empirical evidence suggests that oil price changes affect real economic activity and employment oil prices are important in explaining stock price movements stock returns do not lead to changes in real activity and employment

is there a homogeneous causality pattern between oil prices and currencies of oil importers and exporters although the link between oil prices and dollar exchange rates has been frequently analyzed a clear distinction between prices and nominal exchange rate dynamics and a clarification of the issue of causality has not been provided in addition previous studies have mostly neglected nonlinearities which for example may stem from exogenous oil price shocks using monthly data for various oil exporting and oil importing countries this study contributes to the clarification of those issues we discriminate between long run and time varying short run dynamics using a markov switching vector error correction model in terms of causality the results differ between the economies under observation but suggest that the most important causality runs from exchange rates to oil prices with a depreciation of the dollar triggering an increase in oil prices on the other hand changes in nominal oil prices are responsible for ambiguous real exchange rate effects mostly through the price differential and partly also through a direct influence on the nominal exchange rate overall the fact that the adjustment pattern frequently differs between regimes underlines the fact that the relationships are subject to changes over time suggesting that nonlinearities are an important issue when analyzing oil prices and exchange rates

forecasting oil price realized volatility using information channels from other asset classes motivated from ross 1989 who maintains that asset volatilities are synonymous to the information flow we claim that cross market volatility transmission effects are synonymous to cross market information flows or information channels from one market to another based on this assertion we assess whether cross market volatility flows contain important information that can improve the accuracy of oil price realized volatility forecasting we concentrate on realized volatilities derived from the intra day prices of the brent crude oil and four different asset classes stocks forex commodities and macro which represent the different information channels by which oil price volatility is impacted from we employ a har framework and estimate forecasts for 1 day to 66 days ahead our findings provide strong evidence that the use of the different information channels enhances the predictive accuracy of oil price realized volatility at all forecasting horizons numerous forecasting evaluation tests and alternative model specifications confirm the robustness of our results

business as usual economic responses to political tensions do political tensions harm economic relations theories claim that trade prevents war and political relations motivate trade but less is known about whether smaller shifts in political relations impact economic exchange looking at two major economies we show that negative events have not hurt u s or japanese trade or investment flows we then examine specific incidents of tensions in u s french and sino japanese relations over the past decade two case pairs that allow us to compare varying levels of political tension given high existing economic interdependence and different alliance relations aggregate economic flows and high salience sectors like wine and autos are unaffected by the deterioration of political relations in an era of globalization actors lack incentives to link political and economic relations we argue that sunk costs in existing trade and investment make governments firms and consumers unlikely to change their behavior in response to political disputes d o political tensions have economic consequences the relationship between economic interdependence and conflict has been a central debate in international relations leading scholars contend that states with good relations should have more trade than states with poor relations and import decisions of firms will respond to the climate of friendliness orhostilitythatexistsbetweentheimporterandexporter morrow siverson and tabares 1998 650 pollins 1989b 739 analysis of trade and conflict in a simultaneous equations model concludes that political relations are driving commerce not the other way around keshk pollins and reuveny 2004 1175 we reexamine these arguments in the current globalization era to show that sunk costs reduce incentives for state and private actors to link political and economic relations 1

does political conflict hurt trade evidence from consumer boycotts i estimate the impact of international conflict on bilateral trade relations using several incidents of politically motivated boycotts the boycott of danish goods by muslim countries following the muhammad comic crisis in 2005 2006 the chinese boycott of japanese goods in response to the senkaku diaoyu island conflict in 2012 the boycott of french products in the us over the iraq war in 2003 and turkey s boycott of israel over the gaza conflict in 2014 the results from difference in differences regressions and the synthetic control group method show that boycotts can have strong negative effects on bilateral trade in both goods and services i estimate an average one year trade disruption of 18 8 in the case of denmark 2 7 for japan and 1 7 for french imports where in the latter two cases this effect is only short term for all boycott instances this is only a minor share of overall exports of the boycotted country over the same period for the iraq and gaza conflicts there is a reciprocal negative effect on the boycotted countries imports from the boycotter product level results are in line with intuition boycotts are most effective for consumer goods especially highly branded signature export goods such as japanese cars while having at most a temporary effect on intermediates and capital goods an event study on japanese stock market returns suggests that the chinese boycott depressed stock values of explicitly boycotted japanese firms only temporarily

dynamic effects of rising oil prices on consumer energy prices in canada and the united states evidence from the last half a century abstract this paper examines the dynamic relationship between the price of crude oil and the cpi energy price sub index in canada and the u s using a markov regime switching model and the bai perron sequential method since these two series are cointegrated during the sample period january 1961 june 2013 a short run dynamic model is thus estimated for each country in which all coefficients and the error variance terms can freely switch over time between two values prevailing in regimes 0 and 1 previous studies indicate that the price of crude oil does not currently affect the aggregate cpi as much as it did in the 1970s this finding is not disputed in this paper however the sequentially determined break date as well as the time varying regime switching probabilities point to two new findings first the marginal effects of changes in oil price on consumer energy prices not the aggregate cpi have consistently increased and become more instantaneous for both countries after the western u s energy crisis of 2000 second the speed of adjustment proxied by different error correction coefficients has also risen particularly for the u s therefore oil prices exert far more positive and immediate impacts on energy costs in the post rather than pre 1999 periods

oil windfalls in a controlled economy a fix price equilibrium analysis of algeria abstract the algerian macroeconomic response to oil windfalls which differs from that expected of a neoclassical economy is examined through application of fix price equilibrium analysis a model of the aggregate macroeconomy is specified and its response decomposed into behavioral and involuntary spillover elements the implications of classical unemployment are derived econometric estimation of the model for the period 1966 1984 supports the importance of involuntary spillovers as an explanation of algeria s unusual pattern of demand and money balance accumulation rationing is shown to have been considerable relative to observed consumption in recent years two major conclusions are drawn 1 fix price modeling captures an important feature of the algerian economy during this period analyses ignoring spillovers will provide biased results 2 conventional neoclassical estimation will in general confound behavioral parameters and spillover effects for countries where the price mechanism is not permitted to operate freely this will lead to biased behavioral estimates and inaccurate policy advice

forecasting realized volatility of crude oil futures with equity market uncertainty this paper examines whether the equity market uncertainty emu index contains incremental information for forecasting the realized volatility of crude oil futures we use 5 min high frequency tran