Politics and economics

Pierluigi Balduzzi, Emanuele Brancati, Marco Brianti, Fabio Schiantarelli, 20 February 2020

The effects of political uncertainty can be captured in the spread of sovereign credit default swaps. This column shows how the rise of populist movements in Italy following the Global Crisis and sovereign debt crisis can be traced within the country’s contract price levels, and also highlights the impacts on the real economy. Italy has been an ideal laboratory to explore and learn about the economic consequences of political risk shocks, and the instability there means this is likely to continue to be the case in the future.

Thushyanthan Baskaran, Zohal Hessami, 18 February 2020

The fact that women are underrepresented in politics is often viewed as an important social problem. But why should it be a problem? This column argues that when too few women hold political office, political decisions may not adequately reflect women’s needs and preferences. Using the example of the public provision of childcare in Germany, it shows that municipalities with a higher share of female councillors expand public childcare more quickly. The fact that the presence of women has substantive effects on policies should be taken into account in current debates around the introduction of gender quotas in politics.

Kai Gehring, Stephan A. Schneider, 18 February 2020

Secessionist parties draw upon rhetoric on cultural identity and political autonomy to garner votes. However, the parties’ electoral success is also influenced by the availability of regional resources. This column examines two secessionist parties in the UK – the Scottish National Party and the Welsh Plaid Cymru – and the divergence in their performance following the discovery of oil within Scotland’s hypothetical maritime borders. It finds that a 10% increase in relative regional wealth is associated with an increase of 3 percentage points in the vote share of secessionist parties. Relative regional resource wealth is more important than absolute wealth, and changes in regional resource wealth only play a role when there is baseline support for secession.

Paolo Manasse, Graziano Moramarco, Giulio Trigilia, 17 February 2020

The pound depreciated overnight by about 7% against the euro and other main currencies following the Leave victory in the UK’s EU referendum, suggesting that the markets expected Brexit to harm the British economy. Yet currency markets hailed the overwhelming victory of Brexiter Boris Johnson’s Conservative Party in the 2019 general election with a 2% appreciation of the pound. This column argues that this apparent contradiction can be explained by disentangling the effects that politics has on exchange rate expectations and a political risk premium.

Tim Besley, Thiemo Fetzer, Hannes Mueller, 14 February 2020

Reporting on violence draws attention to countries not typically covered by international news outlets. This leads to a ‘bad news’ bias, which can affect not only how people view these countries, but whether they choose to visit. Using aggregated spending data to proxy tourist activity, this column documents a robust relationship between the intensity of reporting on violence and subsequent drops in tourist spending, suggesting that a bad news bias can have serious economic consequences for the countries that suffer from it. 

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