190 research outputs found

    Annual Report 2022

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    The politics of economic collapse: a comparative historical sociology of the 2008 crisis

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    The 2008 financial crisis was the second major financial crisis in modern history. Like the 1930s Great Depression, the 2008 Great Recession shook political and social arenas. From socio-economic policy reforms to popular political mobilisations, advanced capitalist countries underwent important political and institutional reconfigurations. Yet 12 years later, and despite the depth and scale of these initial responses, neoliberal domestic configurations that had been in place since the 1980s withstood in the longer term. Institutional and social responses suggest that the postwar market embeddedness that facilitated unprecedented levels of social and economic welfare in Europe is perhaps now in terminal regression. Given the historical magnitude of the Great Recession and the responses it occasioned, this study asks: can we empirically establish (a) historical path(s) between the Great Depression in the 1930s and the Great Recession in 2008 amongst the selected Western European countries? Viewed comparatively and being mindful of their longer trajectories, how did they converge or diverge in the run-up to 2008 and how their convergence/divergence explains their institutional response to the crisis? And, can we identify opportunities for significant paradigm-changing reactions from the Western European publics or civil societies? Recent sociological work has sought to understand 2008 by examining sociodemographic, institutional and attitudinal data (e.g. Hooghe and Quintelier, 2014; Kern et al., 2015; Marien et al., 2010). Much of this scholarly work has arguably paid insufficient attention to the deeper historical embedding of the Great Recession and its political and civil society responses. By contrast, economic historians have examined the Great Recession in light of previous crises (e.g. Bordo, 2018; Kobrak and Wilkins, 2011; Nayak, 2013) but with little attention paid to civil society responses, and thereby also neglecting an important political dimension of the economic crisis. This study broadly draws on these bodies of work but seeks also to make a contribution by using a comparative historical sociological approach to explore three distinct dimensions of the Great Recession. The first is presented in Chapter 4. It positions Western European political elites’ responses to the Great Recession in a historical long-run, in which 2008 is considered in the light of the 1930s and the responses that the Great Depression had occasioned. The second dimension is presented in Chapter 5, which turns the macro-historical comparative lens of the previous chapter to what might be termed a meso-level analysis. Chapter 5 thus presents a comparative examination of Western European states’ political responses according to a regime-typology (the Anglos, the Euros, and the Nordics). Finally, Chapter 6 comparatively examines survey data from the European Social Survey (ESS) to allow reflection on how Western publics responded to these various measures. Central to this thesis is the retrieval of the comparative historical sociology of Polanyi (1957), Mann (1983; 1993; 2012; 2013), and Esping-Andersen (1990). Drawing from Polanyi, I use his concepts of ‘market embeddedness’ and ‘double movement’ to examine the historical drift from welfarism to today’s neoliberalism; from Mann, I take his comprehensive ideological, economic, military, and political (IEMP) model to dissect the different causal sources of the crisis and the responses to it; and from Esping-Andersen, I employ his ideal-typical classification of modern capitalist welfare states. Following the introduction, theory, and methods discussion, Chapter 4 traces the broad lineages of the development of welfare states across Western Europe from the beginning of the 20th century and, crucially, as punctuated by the Great Depression. I show that there was a common path-dependent movement towards welfare policies after a series of major historical disruptions, but this was then reversed in the late 1970s in a new iteration of Polanyi’s double movement. Expanding the analysis of such critical juncture, Chapters 5 offers a typology to explore the varying responses to the Great Recession across three geopolitical regions: the liberal Anglos, the conservative Euros, and the social-democratic Nordics. I argue that whilst initial political responses converged in 2008 to follow an expansionary rationale reminiscent of 1930s Keynesian logic, each soon reverted fully to historical form, i.e., the neoliberal logic of austerity and fiscal discipline. More, and based on accompanying analysis of ESS data, I find that Western European publics are deeply mistrusting of democratic institutions and political actors. This supports contemporary views that see liberal democracy under threat (e.g., Runciman, 2018; Applebaum, 2020). Today’s low levels of political trust can be seen as positive feedback reinforcements of the neoliberal pathway Western Europe took in the 1980s, thus suggesting that European publics will not exert pressure for a new socially embedding move as it had partially happened in the 1930s. Yet, also importantly, this reasserts Mann’s (1970) classical argument that liberal democracy’s stability requires apathetic, non-committed publics. On this basis, I conclude that the impacts of the Great Recession are best understood against longer-term historical path-dependent political lineages

    Financial Fragility and the Fiscal Multiplier

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    We show that undercapitalized banks with large holdings of government bonds subject to sovereign default risk lead to a new crowding-out channel: deficit-financed fiscal stimuli lead to higher bond yields, triggering capital losses for the banks. Banks then cut back loans, giving rise to potentially negative fiscal multipliers. Crowding out increases for longer maturity bonds and higher sovereign default risk. We estimate a DSGE model with financial frictions for Spain and find strong support for these results. The DSGE results further show strong nonlinear effects: the cumulative multiplier decreases substantially with the size of the stimulus, as well as with the amount of time between the announcement and implementation of the stimulus.<br/

    Post-Growth Geographies: Spatial Relations of Diverse and Alternative Economies

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    Post-Growth Geographies examines the spatial relations of diverse and alternative economies between growth-oriented institutions and multiple socio-ecological crises. The book brings together conceptual and empirical contributions from geography and its neighbouring disciplines and offers different perspectives on the possibilities, demands and critiques of post-growth transformation. Through case studies and interviews, the contributions combine voices from activism, civil society, planning and politics with current theoretical debates on socio-ecological transformation

    From trade to terror: how global banks impact local economies

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    This thesis investigates three aspects of global banks that go beyond their textbook understanding as lenders and deposit-takers. Using export data from emerging Europe, the first chapter shows that when local banks lose correspondent banking services, their corporate clients reduce exports, leading to decreased revenues and employment. The second chapter investigates the impact of organ trafficking on local conflict. By exploiting exogenous variation in kidney demand from the US waiting list for kidneys, I find that higher US kidney demand increases conflict in localities with a transplanting hospital in countries known for illegal organ trafficking. Based on data from the German credit register and proprietary supervisory information, the third chapter first observes that banks lend more to banks that are similar to them. It then shows how a similar portfolio of the lending and borrowing bank helps overcome information asymmetries in interbank markets

    Basel III: Implications of Capital and Liquidity Regulations on Financial Stability during Economic Depression.

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    The dynamic global financial system has made it necessary to implement adequate regulatory measures that can effectively guarantee financial stability at the national and international levels. This thesis consists of three self-contained analytical chapters that focus on the effectiveness of evolving financial regulations in addressing systemic risk within the financial system. Despite numerous regulatory reforms introduced following the 2008 GFC, they are still concerns over the role of these regulations in mitigating complex issues related to systemic risk. The first study focuses on international and national regulatory frameworks in the context of conventional, hybrid, and Islamic banking. It analyses the guidance provided by the Basel Committee on Banking Supervision (BCBS) and the Islamic Financial Services Board (IFSB) and examines the differences in the treatment of credit, liquidity, and systemic risk across four countries. The IFSB converts BCBS guidance to ensure compliance with Sharia principles for Islamic banks. Further insights show variations in liquidity and capital requirements imposed on banks in different countries, highlighting the need for countryspecific regulations to address the unique risks. The second study uses data from emerging market economies to investigate the relationship between capital and liquidity regulations under Basel III and their impact on default risk and systemic risk. The study addresses whether the new liquidity and capital requirements, such as the net stable funding ratio and higher capital adequacy ratio, contribute to alleviating the default risk and systemic risk in emerging market economies. The third study focuses on the relationship between credit and liquidity risks and their impact on bank default risk. It also addresses the effect of bank liquidity creation on systemic risk across different types of banks. The findings suggest that while credit and liquidity risks are positively related, no significant relationship exists. The impact of credit and liquidity risks on bank default risk is significant for conventional and hybrid banks, while bank size and capital adequacy ratio play a greater role in the stability of Islamic banks. The joint interaction between credit and liquidity risk negatively influences banking stability. The key findings demonstrate that Basel III's liquidity requirements, such as the Net Stable Funding Ratio (NSFR), play an important role in forecasting banks' default probability and mitigating systemic risk. The insights gathered emphasise the importance of incorporating new mitigating measures, including NSFR, leveraging requirements, countercyclical buffers, and globally systemically important institution surcharges to promote financial stability. Additionally, it demonstrates the relevance of liquidity creation in determining bank stability and its implications for systemic risk. This study offers substantial contributions to the growing body of literature by highlighting the differences in regulatory frameworks, the importance of this approach in developing bank risk profiles, and how they are adequately addressed. The study also contributes to understanding how financial stability can be enhanced while reducing systemic liquidity risk. The study shows that banks, regulators, and policymakers must collaborate adequately across all levels to align risk management and improve regulations and guidelines. This includes sharing information and fostering coordination at the international level

    Financial Fragility and the Fiscal Multiplier

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    We show that undercapitalized banks with large holdings of government bonds subject to sovereign default risk lead to a new crowding-out channel: deficit-financed fiscal stimuli lead to higher bond yields, triggering capital losses for the banks. Banks then cut back loans, giving rise to potentially negative fiscal multipliers. Crowding out increases for longer maturity bonds and higher sovereign default risk. We estimate a DSGE model with financial frictions for Spain and find strong support for these results. The DSGE results further show strong nonlinear effects: the cumulative multiplier decreases substantially with the size of the stimulus, as well as with the amount of time between the announcement and implementation of the stimulus.<br/

    Covid-19 and Capitalism

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    This open access book provides a comprehensive analysis of the socioeconomic determinants of Covid-19. From the end of 2019 until presently, the world has been ravaged by the Covid-19 pandemic. Although the cause of this is (obviously) a virus, the extent to which this virus spread, and therefore the number of infections and deaths, was largely determined by socio-economic factors. From this, it follows that the course of the pandemic varies greatly from one country to another. This observation applies both to countries’ resilience to such a pandemic (which is mainly rooted in the period preceding the outbreak of the virus) and to the way in which countries have reacted to the virus (including the political choices on how to respond). Meanwhile, research has made it clear that the nature of this response (e.g., elimination policy, mitigation policy, and proceeding herd immunity) was, on the one hand, strongly determined by political and ideological factors and, on the other hand, was highly influential in the factors of success or failure in combating the pandemic. The book focuses on the situation in a number of Western regions (notably the USA, the UK, and the EU and its Member States). The author addresses the reasons why in many Western countries both pandemic prevention and response policies to Covid-19 have failed. The book concludes with recommendations concerning the rearrangement of the socio-economic order that could increase the resilience of (Western) societies against such pandemics

    Essays in International Macroeconomics

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    This work studies the impact of foreign shocks on advanced and emerging small-open economies, along different dimensions. Chapter 1 studies pass-through of exchange rates to prices in small-open commodity-exporter economies, taking Canada as a case study. We estimate pass-through on a wide cross-section of disaggregated import, producer, and consumer prices, conditional on commodity shocks that explain a major share of the volatility in price and exchange rate series. Our pass-through measure is free from endogeneity concerns between prices and exchange rates and leads, in some cases, to opposite inference about the sign of pass-through with respect to standard estimates. By focusing on industry-level producer price indexes, we show that conditional pass-through decreases with industry market power, while it increases in the degree of import penetration and persistence of industry-specific shocks. In Chapter 2, we estimate the response of domestic inflation to a US interest rate shock in a sample of 24 emerging economies, using local projection methods. Our results point out that the sign of the inflation response crucially depends on the monetary policy framework: after a US monetary policy tightening, inflation decreases in peggers; inflation increases in floaters that do not target inflation; the inflation response is not statistically different from zero in floaters that are committed to an inflation target. We rationalize this outcome using a standard DSGE model. We show that targeting inflation yields larger welfare gains compared to the other two monetary policy frameworks, even assuming dominant currency pricing. Chapter 3 analyses the impact of global risk aversion on the cost of borrowing for emerging market economies. In a sample of five emerging markets, we show that in response to risk aversion shocks: spreads rise, at all maturities; borrowing long term becomes cheaper. Hence, risk aversion shocks increase the cost of borrowing, but they make borrowing long term more convenient. Our results can be rationalized by considering that passing from periods of low to high risk aversion, the risk-reward trade-off (Sharpe ratio) changes in favour of longer maturities. As a consequence, holding long term bonds becomes more convenient for investors and, thus, issuing long term debt is cheaper for emerging markets. Our results are robust to different specifications of the global risk aversion time series, and to measures of country-specific investor risk aversion
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