New version page

Uncertainty, Relative Prices, and Political Change

Upgrade to remove ads

This preview shows page 1-2-3-4 out of 13 pages.

Save
View Full Document
Premium Document
Do you want full access? Go Premium and unlock all 13 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 13 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 13 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 13 pages.
Access to all documents
Download any document
Ad free experience

Upgrade to remove ads
Unformatted text preview:

Crisis Politics: Uncertainty, Relative Prices, and Political ChangeWhat is a Crisis?Politics in Normal TimesPolitics in Hard TimesUncertaintyVolatility: Reinhart and Rogoff Banking CrisesMonthly VolatilityRelative Price DispersionRelative Price Dispersion: Reinhart and Rogoff Banking CrisesRelative Price Dispersion, 1900-1950Relative Price Dispersion, 1950-2011Political CrisesConclusionCrisis Politics:Uncertainty, Relative Prices, and Political ChangeJeffry A. FriedenDavid A. LakeMichael NicholsonAditya RanganathWhat is a Crisis?Why and how do crises affect national politics?Crises increase uncertainty and change relative prices so as to alter the expected gains from political activity relative to alternatives We posit theoretically grounded, ex ante measures of crisis, independent of (and possibly predictive of) observed political changePolitics in Normal TimesIndividuals pursue their interests in economic and political arenasRelative price changes create winners and losersWinners exploit market opportunities; losers pursue political remediesCollective action central in coalition formationTime horizon – “shadow of the future” – affects ability to resolve collective action problemsLonger time horizon, more stable coalitionsInstitutions induce equilibriumFixed asset holders “vested” in policy regimePolitics in Hard TimesUncertainty shortens time horizons, reducing present value of expected future gains. Large increase in uncertainty can lead actors to abandon existing coalitionsChange in relative prices alters incentives facing individuals. Large change in relative prices leads to new coalitionsActors shift from less to more rewarding economic activitiesActors with fixed assets turn to politicsBoth “shocks” disrupt existing politicsUncertaintyCertainty is the degree of predictability of future exogenous eventsMeasured by stock market volatilityAsymmetric GARCH (w/o autoregressive term)S&P 500, 1900-2011Volatility: Reinhart and Rogoff Banking CrisesDummy Variable for periodCoefficients1907 Crisis 3.843***World War I 2.334***Great Depression 2.186***S&L Crisis 0.429***Great Recession 0.830***Monthly VolatilityRelative Price DispersionMonthly Average Producer Price Indices 1900-1950: seven sectors1950-2011: nine sectorsGreater variance across price changes leads to greater relative price dispersionRelative Price Dispersion: Reinhart and Rogoff Banking CrisesDummy Variable for periodCoefficients1907 Crisis -0.182World War I 0.745***Great Depression 0.097***S&L Crisis -0.015Great Recession 0.090***Relative Price Dispersion, 1900-1950Relative Price Dispersion, 1950-2011Political CrisesStock Market VolatilityRelative Price Disper-sionNormal Greater than one s.d. above the meanNormalNormal TimesAll other yearsPotential Crises1907, 1929-30, 1933-34, 1937-40, 1987-88, 2001-02Greater than one s.d. above the meanPotential Crises1914-20, 1972-73, 1979-80, 1985-86, 1999, 2003-05, 2010-11Hard Times1931-32, 1974-75, 1986-87, 2000, 2008-09ConclusionThe Great Recession: “The times they are a-changin”Stock market volatility second highest since 1900Relative price dispersion fourth highest in any crisis periodNext step: identify winners and losers and map onto post-crisis coalition


Download Uncertainty, Relative Prices, and Political Change
Our administrator received your request to download this document. We will send you the file to your email shortly.
Loading Unlocking...
Login

Join to view Uncertainty, Relative Prices, and Political Change and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view Uncertainty, Relative Prices, and Political Change 2 2 and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?