The Impact of Political Risk on Sovereign Bond Spreads - Evidence from Latin America

Sovereign risk is defined as a country?s ability-to-pay and willingness-to-pay its debt. This paper examines how cabinet reshuffles affecting the ministry of finance or economics are perceived by sovereign bond holders in twelve Latin American countries from 1992 to 2005. We find that such political news instantaneously increases bond spreads. Furthermore, spreads trend significantly upward in the 40 days leading up to the minister change, before flattening out on a higher level in the 40 days thereafter. Evidence suggests that uncertainty about the future course of economic policy and the government?s willingness-to-pay increases refinancing costs for respective emerging markets. --political instability,country risk,bond spreads,Latin America

Spillover effects of minimum wages in a two-sector search model

Labor market studies on the effects of minimum wages are typically confined to the sector or worker group directly affected. We present a two-sector search model in which one sector is more productive than the other one and thus, pays higher wages. In such a framework, setting a minimum wage in the unproductive sector to reduce the wage gap causes a negative spillover effect on the productive sector. While the effect on job creation in the (targeted) unproductive sector is ambiguous, job creation in the (non-targeted) productive sector unambiguously decreases. This is driven by the fact that a minimum wage increases the outside option of unemployed workers - contributing to wage determination in the productive sector. Welfare effects are ambiguous. In principle, we cannot exclude that a minimum wage in a two-sector search model is welfare enhancing due to the possibility of an above optimal level of productive employment since firms do not take into account the effects of their individual job creation on aggregated search costs. --minimum wages,matching models,two sectors,unemployment,welfare

Do Markets Care About Central Bank Governor Changes? Evidence from Emerging Markets

Central bank governor changes in emerging markets may convey important signals about future monetary policy. Based on a new daily data set, this paper examines the reactions of foreign exchange markets, domestic stock market indices and sovereign bond spreads to central bank governor changes. The data cover 20 emerging markets over the period 1992-2006. We find that the replacement of a central bank governor negatively affects financial markets on the announcement day. This negative effect is mainly driven by irregular changes, i.e., changes occurring before the scheduled end of tenure, sending negative signals about perceived central bank independence. Personal characteristics of the central banker, to the contrary, are less important for market reactions. We find no evidence that changes in the central bankers conservatism affect the reactions of the markets. Finally, market reactions are similar in countries with high and low degrees of central bank independence. --central bank governor turnover,monetary policy,emerging markets,risk premium

Do Markets Care about Central Bank Governor Changes? Evidence from Emerging Markets

Central bank governor changes in emerging markets may convey important signals about future monetary policy. Based on a new daily data set, this paper examines the reactions of foreign exchange markets, domestic stock market indices and sovereign bond spreads to central bank governor changes. The data cover 20 emerging markets over the period 1992-2006. We find that the replacement of a central bank governor negatively affects financial markets on the announcement day. This negative effect is mainly driven by irregular changes, i.e., changes occurring before the scheduled end of tenure, sending negative signals about perceived central bank independence. Personal characteristics of the central banker, to the contrary, are less important for market reactions. We find no evidence that changes in the central banker’s conservatism affect the reactions of the markets. Finally, market reactions are similar in countries with high and low degrees of central bank independence.central bank governor turnover, monetary policy, emerging markets, risk premium

Political risk and export promotion: evidence from Germany

Political risk represents an important hidden transaction cost that reduces international trade. This paper investigates the claim that German public export credit guarantees (Hermes guarantees) mitigate this friction to trade flows and hence promote exports. We employ an empirical trade gravity model, where we explicitly control for political risk in the importing country in order to evaluate the effect of export guarantees. The idea behind export promotion through public export credit agencies (ECAs) is that the private market is unable to provide adequate insurance for all risks associated with exports. As a consequence, firms' export activities are limited in the absence of insurance provision. Using a novel data set on guarantees we estimate the effect of guarantees in a static and dynamic panel model. We find a statistically and economically significant positive effect of public export guarantees on exports which indicates that export promotion is indeed effective. Furthermore, political risk turns out to be a robust determinant of exports and hence should be taken into account in any empirical model of trade. --public export credit guarantees,political risk,panel regression

Political risk and export promotion: Evidence from Germany

Political risk represents an important hidden transaction cost that reduces international trade. This paper investigates the claim that German public export credit guarantees (Hermes guarantees) mitigate this friction to trade flows and hence promote exports. We employ an empirical trade gravity model, where we explicitly control for political risk in the importing country in order to evaluate the effect of export guarantees. The idea behind export promotion through public export credit agencies (ECAs) is that the private market is unable to provide adequate insurance for all risks associated with exports. As a consequence, firms' export activities are limited in the absence of insurance provision. Using a novel data set on guarantees we estimate the effect of guarantees in a static and dynamic panel model. We find a statistically and economically significant positive effect of public export guarantees on exports which indicates that export promotion is indeed effective. Furthermore, political risk turns out to be a robust determinant of exports and hence should be taken into account in any empirical model of trade. --public export credit guarantees,political risk,panel regression

Why do people participate in grassroots sustainability initiatives? Different motives for different levels of involvement

Grassroots sustainability initiatives experiment with alternative ways of consumption and are promising agents for fostering pro-environmental behavior change. However, sustainability initiatives depend on high levels of volunteering and collective action. With the present research we aimed to better understand why people participate in sustainability initiatives and whether doing so is an expression of a broader set of pro-environmental behaviors. We tested the predictive importance of various motivational factors derived from grassroots innovation research, the theory of planned behavior, and theories on collective action, using data from a cross-sectional factorial survey of participants in several sustainability initiatives in Switzerland (N = 180). Our results revealed different motivational patterns depending on the level of involvement. The intention to use services and offers of sustainability initiatives (low level of involvement) was best explained by favorable attitudes toward participation and perceived behavioral control, while the intention to volunteer for such initiatives (high level of involvement) was additionally based on strong social identity and a high belief in participative efficacy. Our results also revealed that participation in sustainability initiatives concurs with those other private-sphere pro-environmental behaviors that are most similar to the initiatives' activities. We conclude from our results that the divergence in motivational factors between users and volunteers might pose a challenge to the success of sustainability initiatives and therefore deserves greater attention in future research

Explaining IMF lending decisions after the Cold War

This paper empirically investigates the economic and political factors that affect a country's likelihood to sign an arrangement with the IMF and the determinants of the financial size of such a program. Arguably the world and the global financial architecture underwent structural changes after the ending of Cold War and so did the role of the IMF. Hence, we update and extend the work of Sturm et al. (Economics and Politics 17: 177-213, 2005) by employing a panel model for 165 countries that focuses on the post-Cold War era, i.e., 1990-2009. Our results, based on extreme bounds analysis, suggest that some economic and political variables are robustly related to these two dimensions of IMF program decisions. Furthermore, we show that it is important to distinguish between concessional and non-concessional IMF loan

Impact of temperature and technology on biochar properties from different agricultural residues

Please click Additional Files below to see the full abstrac

Who Benefits from Regional Trade Agreements? The View from the Stock Market

The effects of Regional Trade Agreements (RTAs) are disputed. In this paper, we assess these effects using capital market data and an event-study approach, using a daily data set covering a thousand announcements spanning over eighty economies and a hundred RTAs over twenty recent years. We measure the effects of news concerning RTAs on the returns of national stock markets, adjusted for international stock market movements. We then link these excess returns to features of the RTA members and the agreements themselves. We find evidence of the natural trading partner hypothesis; stock markets rise more when RTAs are signed between countries that already engage in high volumes of trade. Stock markets also rise more when poorer countries sign RTAs.