Filippo Gori, 07 October 2021

Once again, the US finds itself in the midst of a debt ceiling crisis, but what can we learn from previous instances? This column assesses the impact of the 2011 US debt ceiling crisis on US federal government credit risk and on US banks’ funding costs. It estimates that during the first two quarters of 2011, as a result of the disagreement between Republicans and Democrats over the rise in the US debt ceiling, US government credit default swaps increased by 46 basis points, while bank funding costs increased by about 18 basis points.  

Scott Baker, Aniket Baksy, Nicholas Bloom, Steven Davis, Jonathan Rodden, 22 December 2020

Elections can cause economic uncertainty, especially when elections take place in a politically polarised context. This column studies how national election cycles in 23 countries influence economic policy uncertainty, as measured by the share of newspaper articles that discusses uncertainty and economic policy. Economic policy uncertainty clearly rises in the months leading up to national elections. Average economic policy uncertainty values are 13% higher in the month before and the month of national elections than in other months during the same election cycle. In the US, economic policy uncertainty increases are especially pronounced around close and highly polarised presidential elections. 

Geoff Mulgan, 11 April 2014

Geoff Mulgan talks to Romesh Vaitilingam about his recent book, 'The Locust and the Bee: Predators and Creators in Capitalism's Future'. Mulgan suggests that the economic crisis was a dramatic reminder that capitalism can both produce and destroy, but that it also provides a historic opportunity to choose a radically different future for capitalism - one that maximizes its creative power yet minimizes its destructive force. They discuss the importance of social innovation and the creative economy. The interview was recorded in May 2013.

Bryan Kelly, Lubos Pastor, Pietro Veronesi, 31 March 2014

Despite obvious ties between political uncertainty and financial markets, the nature of this connection has not been studied in detail. This column describes a theoretical framework for evaluating the influence of political uncertainty on financial markets. Political uncertainty commands a risk premium, especially when the economy is weak. By raising firms’ cost of capital, it depresses investment and real activity. Furthermore, by raising risk premia, political uncertainty destroys market value.

Scott Baker, Nicholas Bloom, Steven Davis, John Van Reenen, 29 October 2012

The US recovery is painfully slow and monetary policy is at its limits. Pervasive economic uncertainty appears to be holding the US back. But what is the root cause of this uncertainty? This column argues that a polarised political system is to blame. Without a political mechanism that incentivises the election of moderate politicians, the authors predict further political divergence between Republicans and Democrats over the coming years and a consequent intensification of policy uncertainty.

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