Bruno Caprettini, Hans-Joachim Voth, 22 February 2020

Governments of modern states need to convince men and women to fight and possibly to die for their country, putting aside their ‘selfish’ instinct to stay alive. This column examines whether welfare spending under Roosevelt’s New Deal boosted US patriotism during WWII. It finds that higher welfare spending prior to 1940 is positively correlated with greater patriotism, as measured by war bond purchases, volunteering for the US Army, and exceptionally brave acts in battle. The findings suggest that when the federal government looks out for its citizens’ needs, men and women who benefit repay the largesse by becoming more patriotic.

Orkun Saka, 06 January 2020

European banks have been criticised for holding too much domestic government debt during the recent euro area crisis, intensifying the doom loop between sovereign and bank credit risks. This column deviates from previous research that focused on 'bad' reasons for holding sovereign debt, and points to a 'good' reason: an informational advantage that particular banks have regarding sovereigns. This seems to have had a role in the fragmentation of European government bond markets. 

Steven Ongena, Alexander Popov, Neeltje van Horen, 17 March 2016

The European sovereign debt crisis has triggered speculation that part of the increase in banks’ holdings of domestic sovereign debt was driven by ‘moral suasion’ by governments. This column shows that domestic banks in fiscally stressed countries were considerably more likely than foreign banks to increase their holdings of sovereign bonds in those months when the government had to issue a large amount of new debt. This suggests that governments indeed ‘morally sway’ their banks to purchase domestically issued sovereign bonds when sovereign bond markets are stressed.

CEPR Policy Research