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51. The dynamic impact of FX interventions on financial markets

Author:
Lukas Menkhoff, Malte Rieth, and Tobias Stöhr
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Evidence on the effectiveness of FX interventions in the prevailing higher frequency approaches leaves a gap at horizons going beyond a few days. This is addressed by identifying a structural vector autoregressive model for the daily frequency with an external instrument. Using Japanese data, we find that FX interventions significantly affect exchange rates, although the effect is smaller than in emerging markets, and this impact persists for up to a year. There is no major effect on interest rates, but stock prices increase in line with currency devaluation, in particular those of large (exporting) firms. The results qualitatively hold for US and UK interventions.
Topic:
International Political Economy, Exports, Data, and Models
Political Geography:
United States, Japan, and United Kingdom

52. How Market Sentiment Drives Forecasts of Stock Returns

Author:
Roman Frydman, Nicholas Mangee, and Josh Stillwagon
Publication Date:
05-2020
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
We reveal a novel channel through which market participants’ sentiment influences how they forecast stock returns: their optimism (pessimism) affects the weights they assign to fundamentals. Our analysis yields four main findings. First, if good (bad) “news” about dividends and interest rates coincides with participants’ optimism (pessimism), the news about these fundamentals has a significant effect on participants’ forecasts of future returns and has the expected signs (positive for dividends and negative for interest rates). Second, in models without interactions, or when market sentiment is neutral or conflicts with news about dividends and/or interest rates, this news often does not have a significant effect on ex ante or ex post returns. Third, market sentiment is largely unrelated to the state of economic activity, indicating that it is driven by non-fundamental considerations. Moreover, market sentiment influences stock returns highly irregularly, in terms of both timing and magnitude. This finding supports recent theoretical approaches recognizing that economists and market participants alike face Knightian uncertainty about the correct model driving stock returns.
Topic:
Economics, Markets, and Stock Markets
Political Geography:
United States

53. Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016

Author:
Alina K. Bartscher, Moritz Kuhn, Moritz Schularick, and Ulrike I. Steins
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
This paper studies the secular increase in U.S. household debt and its relation to growing income inequality and financial fragility. We exploit a new household-level dataset that covers the joint distributions of debt, income, and wealth in the United States over the past seven decades. The data show that increased borrowing by middle-class families with low income growth played a central role in rising indebtedness. Debt-to-income ratios have risen most dramatically for households between the 50th and 90th percentiles of the income distribution. While their income growth was low, middle-class families borrowed against the sizable housing wealth gains from rising home prices. Home equity borrowing accounts for about half of the increase in U.S. household debt between the 1970s and 2007. The resulting debt increase made balance sheets more sensitive to income and house price fluctuations and turned the American middle class into the epicenter of growing financial fragility.
Topic:
Debt, Finance, Income Inequality, and Economic Growth
Political Geography:
United States

54. How the Disappearance of Unionized Jobs Obliterated an Emergent Black Middle Class

Author:
William Lazonick, Philip Moss, and Joshua Weitz
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
During the 1960s and 1970s, blacks with no more than high-school educations gained significant access to well-paid unionized employment opportunities, epitomized by semi-skilled operative jobs in the automobile industry, to which they previously had limited access. Anti-discrimination laws under Title VII of the 1964 Civil Rights Act with oversight by the Equal Employment Opportunity Commission supported this upward mobility for blacks in the context of a growing demand for blue-collar labor. From the late 1970s, however, the impact of global competition and the offshoring of manufacturing combined with the financialization of the corporation to decimate these stable and well-paid blue-collar jobs. Under the seniority provisions of the now beleaguered industrial unions, blacks tended to be last hired and first fired. As U.S.-based blue-collar jobs were permanently lost, U.S. business corporations and government agencies failed to make sufficient investments in the education and skills of the U.S. labor force to usher in a new era of upward socioeconomic mobility. This organizational failure left blacks most vulnerable to downward mobility. Instead of retaining corporate profits and reinvesting in the productive capabilities of employees, major business corporations became increasingly focused on downsizing their labor forces and distributing profits to shareholders in the form of cash dividends and stock buybacks. Legitimizing massive distributions to shareholders was the flawed and pernicious ideology that a company should be run to “maximize shareholder value.” As the U.S. economy transitioned from the Old Economy business model, characterized by a career with one company, to the New Economy business model, characterized by interfirm labor mobility, advanced education and social networks became increasingly important for building careers in well-paid white-collar occupations. Along with non-white Hispanics, blacks found themselves at a distinct disadvantage relative to whites and Asians in accessing these New Economy middle-class employment opportunities. Eventually, the downward socioeconomic mobility experienced by blacks would also extend to devastating loss of well-paid and stable employment for whites who lacked the higher education now needed to enter the American middle class. By the twenty-first century, general downward mobility had become a defining characteristic of American society, irrespective of race, ethnicity, or gender. Since the 1980s, the enemy of equal employment opportunity through upward socioeconomic mobility has been the pervasive and entrenched corporate-governance ideology and practice of maximizing shareholder value (MSV). For most Americans, of whatever race, ethnicity, and gender, MSV is the not-so-invisible hand that has a chokehold on the emergence of the stable and well-paid employment opportunities that are essential for sustainable prosperity.
Topic:
Labor Issues, Civil Rights, Unions, Black Politics, African American Studies, and Workforce
Political Geography:
United States

55. Immaculate Deception: How (and Why) Bankers Still Enjoy a Global Rescue Network

Author:
Edward J. Kane
Publication Date:
07-2020
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Dodd-Frank is an example of counterfeit reform. It is designed principally to benefit very big banks and it has helped these banks to increase their market share greatly during the last 10 years. The Act provides lesser and contradictory forms of costs and comfort to smaller US bankers and taxpayers, foreign bankers (especially the managers of Deutsche Bank), and foreign governments. Small bankers and taxpayers are encouraged to believe that the 2007-2009 US rescue of the world’s biggest banks was a one-time maneuver. But an opposite message is sent through the press as (with great fanfare) the industry absolves and congratulates ex-officeholders: (1) for having transferred massive amounts of subsidized support not just to stakeholders in US megabanks, but also to European bankers and governments, and (2) for keeping the subsidies flowing long past the panic’s expiry date. Genuine reform will require changes in fraud laws and an effort to post on a continuing basis the value of the safety-net subsidies individual megabanks enjoy.
Topic:
Government, Reform, Regulation, Finance, Global Financial Crisis, and Banking
Political Geography:
United States

56. Seventy years of NATO: Is the Alliance still needed?

Author:
Krševan Antun Dujmović
Publication Date:
04-2019
Content Type:
Working Paper
Institution:
Institute for Development and International Relations (IRMO)
Abstract:
This year the North Atlantic Treaty Origination (NATO) marks seventieth anniversary of its creation. Back in 1949, the founding nations gathered around the United States as the leader of Western liberal democracies, establishing NATO as a military and political alliance that was to serve as a barrier against the Soviet Union, ‘’’’ serve as a counterbalance to NATO and the era of the Cold War gained full sway, with clearly established division in Europe between the capitalist West and communist East, and with only a handful of European countries opting for neutrality. Thus, a bipolar system of world order was established, with defined territories and its export of communism throughout the continent. Just six years later, Moscow assembled the Warsaw Pact together with other Eastern European communist countries, excluding Yugoslavia. The Warsaw Pact was to and frontiers of the two global adversaries, and the Cold War pertained until the collapse of the USSR in 1991. From 1991 onwards, fifteen new independent states emerged from the disintegrated Soviet Union, with the newly founded Russian Federation as its legal successor and a permanent member of the United Nations Security Council. Subsequently the Warsaw Pact had collapsed, and Eastern European countries used a transition period that was to bring them closer to the West, ultimately to NATO and the European Union. The collapse of the Soviet Union was the single most important event in history after the World War II and the world entered into a new era. Back in early nineties, it seemed that Russia and the West have buried the tomahawk of war for an indefinite time, and many political theorists and politicians, in both NATO member states and in Russia, have stated that without its archrival NATO no longer had raison d’etre.
Topic:
Foreign Policy, NATO, International Cooperation, and Military Strategy
Political Geography:
United States, Europe, North Atlantic, and North America

57. Venezuela: First episode of the new Cold War?

Author:
Slobodan Pajovic
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
Institute for Development and International Relations (IRMO)
Abstract:
Since the beginning of 2019, Venezuela has been in the focus of international politics because of its political and institutional crisis, together with its economic and social collapse generated in 2013, transformed into a regional and international crisis. The exit of some estimated three to four million emigrants mostly to neighboring countries of human rights and democratic values, the authoritarian regime of socialist orientation, the current American strategy of strengthening its political and strategic influence in Latin America, the presence of significant non- regional emerging global factors, as well as the cyclical changes of political parties in power in this part of the world. Accordingly, this crisis tests the hemispheric and global leadership of has additionally deepened the contexts of theUS, the influences of emerging global powers the regional crisis including also the security aspect. In short, the crisis can be described as oscillating between the issues of defense like China, Russia, India or Turkey, recently, and the potential of Latin American regionalism and political consensus.
Topic:
Imperialism, Migration, Regional Cooperation, and Financial Crisis
Political Geography:
United States, Latin America, Venezuela, and North America

58. Armenia’s Colourless Revolution

Author:
Jan Cingel
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
Institute for Development and International Relations (IRMO)
Abstract:
Armenia is a landlocked country situated in the South Caucasus region. History of the region was shaped by the clash of three major empires: Ottoman, Persian and Russian trying to win control over it. The modern history of Armenia began in 1991, when the country seceded from the crumbling Soviet Union. Those were difficult years as the fledgling country was in ongoing war with its new post-USSR neighbour – Azerbaijan. The war was waged over “Nagorno- Karabakh”, a region that was mostly populated by ethnic Armenians, however was formally part of the Azerbaijan Soviet Socialist Republic within the USSR. In the international arena, Armenia joined the UN in 1991, the Russia-led defence pact called the Collective Security Treaty Organisation (CSTO) in 1994, and also in that year, NATO’s Partnership for Peace (PfP). Armenia became part of the EU’s Eastern Partnership (EaP) in 2009 and until September 2013 had been negotiating the EU’s Association Agreement (AA), which included a free trade agreement. Two months before the intended completion of negotiations, and after a visit of then President Serzh Sargsyan to Moscow, Armenia announced that it would cancel negotiations with the EU on the AA and that it was going to join the emerging Russia-led Eurasian Economic Union (EAEU) instead. Armenia joined the EAEU in 2014.
Topic:
NATO, Post Colonialism, United Nations, and Revolution
Political Geography:
Russia, United States, Europe, Soviet Union, Armenia, Azerbaijan, and Ottoman Empire

59. Volodymyr Zelensky’s Sweeping Victories: Is Ukraine’s Turn Toward the West Definite?

Author:
Krševan Antun Dujmović
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
Institute for Development and International Relations (IRMO)
Abstract:
For more than half a decade Ukraine has been one of epicenters on the map of geopolitical crises in the world and consequently drawn a lot of international attention worldwide. Ever since it gained its independence form the crumbling Soviet Union in 1991, Ukraine was a of the country also changed. Ukraine has been dominated by Russia as the Russian Empire penetrated deep toward the Black Sea in the 17th century, and the position of inferiority towards Moscow was also the case in the USSR. The first upheaval dubbed the Orange Revolution sort of buffer zone between the West and East, between the United States and European allies on the one hand, and the Russian Federation on the other. With the change of political elites and their political preferences, the orientation in 2004, brought to power Viktor Yushchenko, who tried to conduct reforms and bring Ukraine closer to the West, but the effect of his Presidency were ephemeral. President Viktor Yanukovych turned Ukraine’s sight towards Russia again, but also kept the process of EU association alive before suddenly deciding not to sign the Association Agreement with the EU just days before the planned signing ceremony on 29th November 2013. This Yanukovych’s abrupt turn from EU in favor of stronger ties with Russia triggered the wave of massive public demonstrations which later become known as the Euromaidan and subsequently the Ukrainian revolution in February 2014. The Euromaidan Revolution toppled Yanukovych and the new pro-Western government was formed. Russia soon reacted to the change of tide in Ukraine by annexing the Crimean peninsula in March and soon the armed conflict between the pro- Western government in Kiev and Russia backed rebels in Donetsk and Luhansk Oblasts broke out. Ever since the spring of 2014, Ukraine has been engulfed in a brutal conflict in the east of the country that is hampering its efforts to reform and get closer to the EU. Nonetheless, Ukrainian leadership is under the new President Volodymir Zelensky is striving to forge stronger links with the West and the EU.
Topic:
Foreign Policy, Diplomacy, Military Strategy, European Union, and Geopolitics
Political Geography:
Russia, United States, Europe, Ukraine, Eastern Europe, and Crimea

60. Electric Vehicle Charging in China and the United States

Author:
David Sandlow and Anders Hove
Publication Date:
02-2019
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
At least 1.5 million electric vehicle (EV) chargers have now been installed in homes, businesses, parking garages, shopping centers and other locations around the world. The number of EV chargers is projected to grow rapidly as the electric vehicle stock grows in the years ahead. The EV charging industry is a highly dynamic sector with a wide range of approaches. The industry is emerging from infancy as electrification, mobility-as-a-service and vehicle autonomy interact to produce far-reaching changes in transportation. This report compares EV charging in the world’s two largest electric vehicle markets -- China and the United States – examining policies, technologies and business models. The report is based on more than 50 interviews with industry participants and a review of the Chinese- and English-language literature. Findings include: 1. The EV charging industries in China and the United States are developing largely independently of the other. There is little overlap among the key players in the EV charging industries in each country. 2. The policy frameworks with respect to EV charging in each country differ. The Chinese central government promotes the development of EV charging networks as a matter of national policy. It sets targets, provides funding and mandates standards. Many provincial and local governments also promote EV charging. The United States federal government plays a modest role in EV charging. Several state governments play active roles. 3. EV charging technologies in China and the US are broadly similar. In both countries, cords and plugs are the overwhelmingly dominant technology for charging electric vehicles. (Battery swapping and wireless charging have at most a minor presence.) China has one nationwide EV fast-charging standard, known as China GB/T. The US has three EV fast charging standards: CHAdeMO, SAE Combo and Tesla. 4. In both China and the United States, many types of businesses have begun to offer EV charging services, with a range of overlapping business models and approaches. A growing number of partnerships are emerging, involving independent charging companies, auto manufacturers, utilities, municipalities and others. The role of utility-owned public chargers is larger in China, especially along major long-distance driving corridors. The role of automaker EV charging networks is larger in the United States. 5. Stakeholders in each country could learn from the other. US policymakers could learn from the Chinese government’s multiyear planning with respect EV charging infrastructure, as well as China’s investment in data collection on EV charging. Chinese policymakers could learn from the United States with respect to siting of public EV chargers, as well as US demand response programs. Both countries could learn from the other with respect to EV business models. As the demand for EV charging grows in the years ahead, continued study of the similarities and differences between approaches in China and the United States can help policymakers, businesses and other stakeholders in both countries and around the world.
Topic:
Science and Technology, Infrastructure, Green Technology, and Electricity
Political Geography:
United States, China, Asia, and North America