Clash of Civilizations: Impact of Culture on Militarized Interstate Dispute

Abstract Huntington (1993a, 1993b, 1998, 2000) argued that the fundamental source of con ‡ict in the post-Cold War world will not be primarily ideological or primarily economic, but the great divisions among humankind and the dominating source of con ‡ict will be cultural and religious; as such, the primary axis of con‡ict in the future will be along civilizational lines. To that end, in addition to confronting several of Huntington's hypotheses we scrutinize the impact of culture on militarized interstate disputes and test whether countries that belong to di¤erent civilizations tend to be more involved in con ‡ict than countries that belong to the same civilization. We show that over the period of 1816-2001 civilizational dissimilarity in a dyad increases the probability of con ‡ict calculated at the means of the variables by up to 62.8 percentage points. More strikingly, even after controlling for geographic, political, military and economic factors, being part of di¤erent civilizations in the post-Cold War period brings about 71.2 percentage points higher con ‡ict probability than belonging to the same civilization while it reduces the probability of con ‡ict by 25.7 percentage points during the Cold War. JEL Classi…cation: D74, N40, N70, Z10

Stock vs. bond yields, and demographic fluctutations

This paper analyzes the strong comovement between real stock and nominal bond yields at generational frequencies. Using a stochastic overlapping generations model with cash-in-advance constraints, we show that the simulated life-cycle patterns in savings behavior make both real stock and nominal bond yields comove with the changing population age structure. These persistent comovements account for the equilibrium relation between stock and bond markets. A stochastic Fisher decomposition of nominal bond yields reveals that, while having a moderate effect on both the inflation risk premium and expected inflation, demographic changes affect nominal yields mainly through real bond yields. Using both U.S. data and a cross-country panel, we find empirical support for these theoretical predictions. Finally, we show that the strength of the demographic effect on real yields explains cross-country differences in the comovement between stock and bond markets, while alternative demographic channels fail to explain such cross-country heterogeneity

Inequality in the aftermath of financial crises: some empirical evidence

Analyzing 70 countries over the period 1973–2006, we empirically show that, in the aftermath of financial crises, income inequality exhibits no general pattern of change. This holds for both advanced and emerging economies. However, when we break down the analysis by crisis types, we find that, after stock market crises, inequality goes down in advanced countries, while there is no statistically significant association in emerging ones

Investment shocks and inequality dynamics

We explore the dynamics of income and income inequality under asymmetric information in credit markets. Within a stochastic overlapping-generations framework, we study the investment decision of entrepreneurs with heterogeneous abilities. Under information asymmetry, banks do not observe entrepreneurial ability and offer a single pooled loan contract to all entrepreneurs. We show that, following a negative investment shock, the average quality of the entrepreneur pool improves and banks optimally react by lowering the pooled borrowing rate. This reduction in the borrowing rate mitigates the drop in entrepreneurs' income. Consequently, after a negative investment shock, income inequality decreases less compared to the case of full information. Our findings therefore suggest that information asymmetry lessens the fluctuations in income inequality