Income Shocks, Political Support and Voting Behaviour
Richard Upward, Peter Wright
IWH Discussion Papers,
No. 1,
2024
Abstract
We provide new evidence on the effects of economic shocks on political support, voting behaviour and political opinions over the last 25 years. We exploit a sudden, large and long-lasting shock in the form of job loss and trace out its impact on individual political outcomes for up to 10 years after the event. The availability of detailed information on households before and after the job loss event allows us to reweight a comparison group to closely mimic the job losers in terms of their observable characteristics, pre-existing political support and voting behaviour. We find consistent, long-lasting but quantitatively small effects on support and votes for the incumbent party, and short-lived effects on political engagement. We find limited impact on the support for fringe or populist parties. In the context of Brexit, opposition to the EU was much higher amongst those who lost their jobs, but this was largely due to pre-existing differences which were not exacerbated by the job loss event itself.
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Monetary Policy in an Oil-dependent Economy in the Presence of Multiple Shocks
Andrej Drygalla
Review of World Economics,
February
2023
Abstract
Russian monetary policy has been challenged by large and continuous private capital outflows and a sharp drop in oil prices during 2014. Both contributed to significant depreciation pressures on the ruble and led the central bank to give up its exchange rate management strategy. Against this background, this work estimates a small open economy model for Russia, featuring an oil price sector and extended by a specification of the foreign exchange market to correctly account for systematic central bank interventions. We find that shocks to the oil price and private capital flows substantially affect domestic variables such as inflation and output. Simulations for the estimated actual strategy and alternative regimes suggest that the vulnerability of the Russian economy to external shocks can substantially be lowered by adopting some form of inflation targeting. Strategies to target the nominal exchange rate or the ruble price of oil prove to be inferior.
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Switching to Good Policy? The Case of Central and Eastern European Inflation Targeters
Andrej Drygalla
Macroeconomic Dynamics,
No. 8,
2020
Abstract
The paper analyzes how actual monetary policy changed following the official adoption of inflation targeting in the Czech Republic, Hungary, and Poland and how it affected the volatilities of important macroeconomic variables in the years thereafter. To disentangle the effects of the policy shift from exogenous changes in the volatilities of these variables, a Markov-switching dynamic stochastic general equilibrium model is estimated that allows for regime switches in the policy parameters and the volatilities of shocks hitting the economies. Whereas estimation results reveal periods of high and low volatility for all three economies, the presence of different policy regimes is supported by the underlying data for the Czech Republic and Poland, only. In both economies, monetary policy switched from weak and unsystematic to strong and systematic responses to inflation dynamics. Simulation results suggest that the policy shifts of both central banks successfully reduced inflation volatility in the following years. The observed reduction in output volatility, on the other hand, is attributed more to a reduction in the size of external shocks.
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Trade Effects of Silver Price Fluctuations in 19th-Century China: A Macro Approach
Makram El-Shagi, Lin Zhang
China Economic Journal,
2020
Abstract
We assess the role of silver price fluctuations in Chinese trade and GDP during the late Qing dynasty, when China still had a bimetallic (silver/copper) monetary system, in which silver was mostly used for international trade. Using a structural VAR (SVAR) with blockwise recursive identification, we identify the impact of silver price shocks on the Chinese economy from 1867, when trade data became available, to 1910, one year before the Qing dynasty collapsed. We find that silver price shocks had a sizable impact on both imports and exports but only a very minor effect on the trade balance, only a marginal impact on growth, and almost no effect on domestic prices. Stronger effects were partly mitigated by inelastic export quantities. Generally, the effect of silver price shocks, while considerable, was only short-lived, displaying no persistence in either direction. We find that the bimetallic system in Qing China might have mitigated a potential positive effect of silver depreciation but did not reverse the effect, which – contrary to claims made in the previous literature – was responsible for neither the worsening trade balance nor the inflation and the quickly increasing imports that occurred during our sample period.
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