Countercyclical capital requirement reductions, state dependence and macroeconomic outcomes

We use bank-, loan- and firm-level data together with a quasi-natural experiment to estimate the impact of capital requirement reductions on bank lending and real economic outcomes. We find that capital requirement reductions increase lending both to households and firms at the bank- and loan-level, and that the increased lending to firms translates into higher capital investment at the firm-level. Furthermore, the transmission of lower capital requirements to the real economy has a "double state-dependence". The first state-dependence relates to the characteristics of banks. Specifically, the transmission of lower capital requirements to lending is stronger for banks with lower capital ratios. We interpret this result as capital requirement reductions having a larger effect when they are more binding. The second state-dependence relates to the characteristics of the corporate sector. Specifically, the transmission of lower capital requirements to real economic outcomes - via bank lending - is weaker for firms with higher default risk or more leverage, suggesting that capital requirement reductions is most effective in terms of boosting real economic outcomes when firms are financially sound.publishedVersio

Countercyclical capital requirement reductions, state dependence and macroeconomic outcomes

We use bank-, loan- and firm-level data together with a quasi-natural experiment to estimate the impact of capital requirement reductions on bank lending and real economic outcomes. We find that capital requirement reductions increase lending both to households and firms at the bank- and loan-level, and that the increased lending to firms translates into higher capital investment at the firm-level. Furthermore, the transmission of lower capital requirements to the real economy has a "double state-dependence". The first state-dependence relates to the characteristics of banks. Specifically, the transmission of lower capital requirements to lending is stronger for banks with lower capital ratios. We interpret this result as capital requirement reductions having a larger effect when they are more binding. The second state-dependence relates to the characteristics of the corporate sector. Specifically, the transmission of lower capital requirements to real economic outcomes - via bank lending - is weaker for firms with higher default risk or more leverage, suggesting that capital requirement reductions is most effective in terms of boosting real economic outcomes when firms are financially sound

Manipulation through Biased Product Reviews

We study a signal-jamming model of product review manipulation in which rational consumers consult product reviews and price to better estimate a product’s quality, and a firm, whose quality is either high or low, chooses its price and how much bias to insert into product reviews. We show that both firm types always exert positive effort to manipulate product reviews, and, depending on the equilibrium price level, one or both of them can increase its sales. When the high-type firm exerts more effort than the low-type, review manipulation benefits consumers by raising [lowering] their demand for the high-quality [low-quality] product

The political psychology of participation in Turkey: civic engagement, basic values, political sophistication and the young

This article aims to understand the recent heightened levels of mobilization and unconventional political participation in Turkey. We use a political psychology model that highlights the impact of civic engagement, political sophistication, and values on conventional and unconventional participation. We argue that these factors will be significant predictors of unconventional participation setting it apart from conventional political behaviour, which will be driven by simpler considerations. We expect these qualitative differences in the drivers of conventional and unconventional participation to go beyond age and gender differences and highlight the complexity of political decision-making in Turkey’s electoral authoritarian system. We use the 2012 World Value Survey to test our hypotheses, with a nationally representative sample of Turkish citizens. We find significant variations in the role of values, sophistication and levels of civic engagement for conventional and unconventional participation when controlling for age, gender and left–right ideological orientations. Our findings confirm the complex considerations that drive citizens’ engagement with politics and can be useful to explaining recent political developments in Turkey involving youth, public mobilization and protests, but also mainstream voting choices.</p