The document discusses a model that augments the Eaton-Gersovitz framework for sovereign default with endogenous political turnover. It finds that politically induced short-termism by leaders concerned with reelection can microfound high discount rates and cause large fluctuations in sovereign default risk. Calibrating the model to growth rates and debt market statistics of Mexico, Peru, and Turkey, it shows periods of high default risk correspond to increases in the probability of a low-growth political regime taking hold.
Time consistent fiscal policy in a debt crisis, by Neele Balke (University Co...ADEMU_Project
European sovereign debt crises include large recessions, rising debt and bond spreads, and concerns about sovereign default and inequality. This project investigates the design of optimal time-consistent fiscal policies in debt crises.
Time consistent fiscal policy in a debt crisis, by Neele Balke (University Co...ADEMU_Project
European sovereign debt crises include large recessions, rising debt and bond spreads, and concerns about sovereign default and inequality. This project investigates the design of optimal time-consistent fiscal policies in debt crises.
Sustainable economic and monetary union in Europe ADEMU_Project
Starting from a legal-institutional perspective, the lecture sketched out the major challenges for researchers and policymakers alike. It also looked at the areas of economic governance, monetary union and banking union with a view to the sustainability of Europe’s Economic and Monetary Union.
Competitive effects of trade: Theory and measurement ademuADEMU_Project
Trade induces many different types of reallocations across firms and products. These reallocations include selection effects (which products are sold where; which firms survive, and which ones export) as well as competition effects (responses in markups that generate changes in the relative sales of products in a given destination).
Putting the cycle back into business cycle analysisADEMU_Project
From the ADEMU Project: Paul Beaudry, Dana Galizia and Franck Portier's presentation from the New Developments in Macroeconomics lecture held at UCL on 9 November 2016.
Consumption and house prices in the Great Recession: model meets evidenceADEMU_Project
From the ADEMU project series of lectures, Greg Kaplan, Kurt Mitman and Gianluca Violante examine the property boom-bust, and ask whether it could have been cushioned by a debt-forgiveness policy. Taken from the New Developments in Macroeconomics lecture at UCL London, November 2016
Pension (In)Stability of Social Security ReformGRAPE
In this paper we consider an economy populated by overlapping generations, who vote on abolishing the funded system and replacing it with the pay-as-you-go scheme (i.e. unprivatizing the pension system). We compare politically stable and politically unstable reforms and show that even if the funded system is overall welfare enhancing, the cohort distribution of benefits along the transition path turns unprivatizing social security politically favorable.
Political (In)Stability of Social Security ReformGRAPE
We analyze the political stability of welfare enhancing privatization of the social security. We consider an economy populated by overlapping generations, who vote on abolishing the funded system and replacing it with the pay-as-you-go scheme, i.e. “unprivatizing” the pension system. We show that even if abolishing the system reduces overall welfare, the distribution of benefits across cohorts along the transition path implies that some ways of “unprivatizing” social security are always politically favored
Political (In)Stability of Social Security ReformGRAPE
In this paper we consider an economy populated by overlapping generations, which may decide about abolishing the funded system and replacing it with the pay-as- you-go scheme (i.e. unprivatizing the pension system). We compare politically stable and politically unstable reforms and show that even if the funded system is overall welfare enhancing, the cohort distribution of benefits along the transition path turns unprivatizing social security politically favorable.
The heterogeneous effects of government spending, by Axelle Ferriere (Europea...ADEMU_Project
How expansionary is government spending? Evidence shows if
output increases, consumption doesn't decrease. Axelle Ferriere revisits this question, taking into account tax distribution.
On the optimal introduction of a funded pension pillarGRAPE
Jan Woźnica, Marcin Bielecki, Krzysztof Makarski and Joanna Tyrowicz Group for Research in APplied Economics (GRAPE)
15th International Pension Workshop
Paris, May 2017
Agents gradually learn the structure of the economy.
Learning model delivers a sizeable recession in 2008-2010,
...whereas RE model predicts a counterfactual expansion.
In a medium scale model learning still matters.
Political (In)Stability of Pension System ReformsGRAPE
We analyze the political stability of welfare enhancing privatization of the social security. We consider an economy populated by overlapping generations, who vote on abolishing the funded system and replacing it with the pay-as-you-go scheme, i.e. “unprivatizing” the pension system. We show that even if abolishing the system reduces overall welfare, the distribution of benefits across cohorts along the transition path implies that some ways of “unprivatizing” social security are always politically favored
Non-tradable Goods, Factor Markets Frictions, and International Capital FlowsGRAPE
International capital flows - data vs. theory
1 Feldstein-Horioka puzzle
• corr (S, I ) > 0 in the data
2 Lucas puzzle
• K has not flown to poor countries, despite
K
Y
poor
<
K
Y
rich
3 Allocation Puzzle
• corr (ΔTFP, Δexternal debt) < 0
4 Quantity Puzzle (not as famous as the other three)
• Neo-classical 1-sector model over-predicts international
capital flows by a factor of 10
• Gourinchas and Jeanne (REStud, 2013); Rothert (EL, 2016)
Non-tradable Goods, Factor Markets Frictions, and International Capital FlowsGRAPE
International capital flows - data vs. theory
1 Feldstein-Horioka puzzle
• corr (S, I ) > 0 in the data
2 Lucas puzzle
• K has not flown to poor countries, despite
K
Y
poor
<
K
Y
rich
3 Allocation Puzzle
• corr (ΔTFP, Δexternal debt) < 0
4 Quantity Puzzle (not as famous as the other three)
• Neo-classical 1-sector model over-predicts international
capital flows by a factor of 10
• Gourinchas and Jeanne (REStud, 2013); Rothert (EL, 2016)
Progressing towards efficiency: the role for labor tax progression in reformi...GRAPE
We study interactions between the progressive labor tax and the social security reform. Increasing longevity necessitates reforming social security due to raising the fiscal strain on the current systems. The current systems are redistributive, which provides (at least partial) insurance against idiosyncratic income shocks, but at the expense of labor supply distortions. Analogously, linking pensions to individual incomes reduces distortions associated with social security contributions, but ushers insurance loss. The existing view in the literature is that net outcome of such reform is negative. Contrary to this view, we show that progressive labor tax can partially substitute for the insurance loss when social security becomes less redistributive.
Why inefficient institutions emerge and persist over time?Nurlan Jahangirli
Modeling the micro-foundational process to explain potential reasons how through patronage politics inefficient institutions emerge and persist over time. In this model, there are different types of individuals interacting and determining the equilibrium state of economic and political inefficiencies as a choice by the rich elite.
Stimulating old-age savings under incomplete rationalityGRAPE
Financing consumption of the elderly in the face of the projected increase in life expectancy is a key challenge for economic policy. Moreover, standard structural models with fully rational agents suggest that about 50-60 percent of old-age consumption is financed with voluntary savings, even in the presence of a fairly generous public pension system. This is clearly inconsistent with either the data, or the alarming simulations of old-age poverty in the years to come. Old-age saving (OAS) schemes are widely used policy instruments to address this challenge, but structural evaluations of such instruments remain rare. We develop a framework with incompletely rational agents: lacking financial literacy and experiencing commitment difficulties. We study a broad selection of OAS schemes and find that they raise welfare of financially illiterate agents and to a lesser extent improve welfare of agents with a high degree of time inconsistency. They also reduce the incidence of poverty at old age. Unfortunately, these instruments are fiscally costly, induce considerable crowd-out and direct fiscal transfers mostly to those agents, who need it the least.
Similar to "Endogenous Political Turnover and Fluctuations in Sovereign Default Risk", by Satyajit Chatterjee and Burcu Eyigungor (20)
Ademu at the European Parliament, 27 March 2018ADEMU_Project
ADEMU scientific co-ordinator Ramon Marimon joined Marco Buti, director general of DG-ECFIN, DG Economic and Financial Affairs, Roberto Gualtieri, MEP and chair of the Committee on Economic and Monetary Affairs at the European Parliament, Maria Kayamanidou, deputy head of DG Research and Innovation at the EC, and Vincenzo Grassi, secretary general of the European University Institute, to discuss ADEMU's proposals for the European Unemployment Insurance System (EUIS) and the European Stability Fund (ESF).
Should robots be taxed? Discussion by Lukas MayrADEMU_Project
Discussion of the paper by Joao Guerreiro (Northwestern University) Sergio Rebelo (Northwestern University, NBER and CEPR), Pedro Teles (Católica-Lisbon School of Business & Economics, Banco de Portugal and CEPR)
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
Seminar: Gender Board Diversity through Ownership NetworksGRAPE
Seminar on gender diversity spillovers through ownership networks at FAME|GRAPE. Presenting novel research. Studies in economics and management using econometrics methods.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the what'sapp number.
+12349014282
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the what'sapp number of my personal pi merchant who i trade pi with.
Message: +12349014282 VIA Whatsapp.
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BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the what'sapp contact of my personal pi merchant to trade with.
+12349014282
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the what's app number of my personal pi vendor to trade with.
+12349014282
This presentation poster infographic delves into the multifaceted impacts of globalization through the lens of Nike, a prominent global brand. It explores how globalization has reshaped Nike's supply chain, marketing strategies, and cultural influence worldwide, examining both the benefits and challenges associated with its global expansion.
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"Endogenous Political Turnover and Fluctuations in Sovereign Default Risk", by Satyajit Chatterjee and Burcu Eyigungor
1. Endogenous Political Turnover and Fluctuations in
Sovereign Default Risk
Satyajit Chatterjee and Burcu Eyigungor
FRB Philadelphia
Cambridge-INET Inst Conf
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 1 / 31
2. Focus
Foreign borrowing and conflict of interest between sovereigns and
citizens
Three emerging economies — Mexico, Peru and Turkey
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 2 / 31
3. Motivation
A vibrant quantitative-theoretic literature that builds on Eaton and
Gersovitz (1981)
Posits high discount rates to account for observed default risk (2-3
defaults per century)
Not uncommon to see annual discount rates close to 20 percent (com-
parable discount rates for AE DSGE models would be 4 percent or
less)
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 3 / 31
4. What We Do
EG framework augmented with politically induced short-termism
Conventional discount rate, but drop the benevolent dictator assump-
tion
Instead, sovereign is a public good provider with an agency cost; di-
verts a portion of public expenditures for private consumption
Conflict of interest: anticipated loss of power makes sovereign
myopic
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 4 / 31
5. What We Do
EG framework augmented with politically induced short-termism
Empirically, political turnover is linked to economic performance
Brender and Drazen (2008): For democratic EMEs, a 1 percentage
point increase in growth rate during term increases reelection probabil-
ity by 6-9 percentage points
Growth follows a 2-regime Markov-switching process as in Hamilton
(1989)
Link reelection prob positively to prob that regime is good
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 5 / 31
6. What We Get
Political short-termism microfounds high discount rates – exogenous
political turnover model ∼ benevolent dictator w/ high discount
rate
Endogenous political turnover implies growth-linked variations in the
effective discount factor – large fluctuations in sovereign default
risk
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 6 / 31
10. Government Stability and Spreads
ICRG Government Stability Index and EME Spreads
Country Corr(GSI, Spreads)
Argentina −0.53
Brazil −0.11
Ecuador 0.35
Malaysia −0.65
Mexico −0.12
Peru 0.01
Russia −0.33
Venezuela −0.28
Uruguay −0.72
Source: Scholl (2016, Table 1, pp. 28). All series are HP-filtered with
smoothing parameter of 100
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 10 / 31
11. Literature
Politics and short-termism Alesina and Tabellini (1990), Persson
and Svensson (1989), Inman and Fitts (1990) . . .
Sov debt with politically-induced myopia: Cuadra and Sapriza
(2008), Scholl (2016), Amador (2012), Aguiar and Amador (2011),
Alfaro and Kanczuk (2016)
Sov debt with exogenously fluctuating myopia: Cole, Dow, and
English (1995), Hatchondo, Martinez, and Sapriza (2009), D’Erasmo
(2012)
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 11 / 31
13. Preferences
Politician, conditional on being in power
U([1 − τ]Kt ) + Ψ U(τKt )
Politician, when out of power
U([1 − τ]Kt )
Citizens (voters)
U([1 − τ]Kt )
U(C) = C1−γ
1−γ
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 13 / 31
15. Market Structure
Sovereign can borrow externally (only) with option to default
Debt is long-term: λBt is due & (1 − λ)Bt earns coupon z
Default option
Creditors get nothing in default
Default leads to exclusion and φYt is lost each period until re-entry
Re-entry occurs with probability (1 − ξ)
Market price of debt: q(Yt,gt,θt,Bt+1)
Ωt = {Yt,gt}
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 15 / 31
16. Timing
Inherit Bt & θt−1
Observe gt and update θt
With prob π election is called
If challenger wins, θt is reset to θ
Leader chooses default or Bt+1
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 16 / 31
17. Election Uncertainty
Pre-election value of citizens under access V (Ω,θ,B)
Incumbent wins if
V (·,θ,·) − V (·,θ,·) >
(a shock in favor of the challenger) ∼ Type 1 EV with var ∝ κ
η(Ω,θ,B) =
exp(V (·,θ,·)/κ)
exp(V (·,θ,·)/κ) + exp(V (·,θ,·)/κ)
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 17 / 31
23. Parameters Chosen Independently
Parm. Description Targets {PE,MX,TR)} Values {PE,MX,TR)}
Revenue Process
ρ Autocorrelation of growth rates { 0.43, 0.28, 0.19 } { 0.43, 0.28, 0.19 }
µG % Mean growth, G regime { 0.39, 0.16, 0.20 } { 0.39, 0.16, 0.20 }
µB % Mean growth, B regime { −0.59, −0.28, −0.17 } { −0.59, −0.28, −0.17 }
σG % S.D. of growth, G regime { 0.88, 0.67, 0.69 } { 0.88, 0.67, 0.69 }
σB % S.D. of growth, B regime { 3.80, 1.82, 3.19 } { 3.80, 1.82, 3.19 }
Preferences
β Discount Factor {0.9876,0.9876 ,0.9876 } {0.9876,0.9876,0.9876}
γ Utility Curvature 0.5 0.5
Default Cost
ξ Prob of Re-entry 1 year to settlement, on average 0.25
Bond Market
rf Risk-free Rate 0.01 0.01
λ Prob of maturity Avg. maturity in years {8.18,9.65,6.70} {0.031,0.026 ,0.037}
z Coupon rate 0.01 0.01
Politics
π Prob. of election Every 4 years, on average 1/16
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 23 / 31
24. Parameters Chosen Jointly
Parm. Description Targets {PE,MX,TR)} Values {PE,MX,TR)}
Revenue Process
αG Prob of G to B {0.07, 0.04, 0.10} {0.06, 0.04, 0.10 }
αB Prob of B to G {0.11, 0.07, 0.11} {0.06, 0.02, 0.08 }
Bond Market
φ Default Cost Avg. haircut × Avg. (b/y)
0.37× {1.5, 0.92, 0.91} {0.20, 0.11, 0.11}
Politics
ζ Diversion % Annualized avg. spreads {3.4, 3.4, 3.9} {0.38, 0.07, 0.12}
θ Prob. new gov’t is G Avg. incumbency of 8 years, equivalently,
avg. reelection probability of 0.5 {0.81, 0.87, 0.64}
κ Election uncertainty A reelection prob. increase of 6-9 ppts
for 1% rise in average g over term {0.24, 0.06, 0.05}
“Tremble”
¯m m ∼ U[− ¯m, ¯m] Convergence in < 104 iterations 10−2× {1, 2.5, 1.5}
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 24 / 31
31. Conclusion
An Alternative Approach to Sovereign Debt and Default
Sovereign as a public-good provider with agency costs
Agency costs imply short-termism in the face of political turnover
Short-termism is amplified in bad times (when turnover is more likely)
leading to volatility
Well-suited to aggregative analysis of EMEs
For the future: Connect to literature on political institutions and
agency costs
Chatterjee-Eyigungor Politics and Fluctuations Cambridge-INET Inst Conf 31 / 31
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