Richard Jong-A-Pin

Will business cycles in the Euro Area converge: a critical survey of empirical research

This survey of business cycle synchronization in the European monetary union focuses on two issues: have business cycles become more similar, and which factors drive business cycle synchronization. We conclude that business cycles in the euro area have gone through periods of both convergence and divergence. Still, there is quite some evidence that during the 1990s business cycle synchronization in the euro area has increased. Higher trade intensity is found to lead to more synchronization, but the point estimates vary widely. The evidence for other factors affecting business cycle synchronization is very mixed.

TERRORISM AND CABINET DURATION

Terrorism can strengthen or weaken electoral support for ruling governments. We show in a simple model of coalition formation that, regardless of the direction of a public opinion shock, the impact of terrorism on cabinet duration is ambiguous. However, in an analysis of a data set including 2,400 cabinets in over 150 countries in the period 1970–2002, we find that terrorism, on average, shortens cabinet duration. This result is robust for a range of alternative terror measures and is present in both democratic as well as autocratic political regimes.

The European Economic and Monetary Union and Labour Market Reform

We examine whether the EMU has led to greater labour market flexibility, differentiating between reform that enhances the capacity of an economy to adjust to economic shocks and reform that aims to increase long-run output. Based on a panel model and using OECD data on labour market reforms for 27 OECD countries over the period 1994—2004, we find that the two types of labour market reform are driven by different variables. Most importantly, our results suggest that the EMU has had no effect on reform that enhances the economy’s capacity to adjust to shocks. Most of our evidence for reform that increases long-run output suggests that the EMU has not affected this type of reform either.

On the relationship between central bank independence and inflation: some more bad news

Using the quantile regression approach it is shown for a sample of 57 developing countries that the relationship between central bank independence and inflation over the period 1975–98 is not robust. Only in the higher quantiles do we find a significant relationship between independence and inflation. This conclusion is based on a multivariate model for inflation, in which central bank independence is proxied by the central bank turnover rate.

Do Coup Leaders Matter?: Leadership Change and Economic Growth in Politically Unstable Countries

We examine the impact of leadership change after a coup d’etat on economic growth. We consider successful coup attempts as our treatment group and use failed coup attempts as controls to condition on political instability. To take account of selection bias, we control for the determinants of coup success. Our main finding is that leadership changes after a coup d’etat have a positive effect on economic growth in the least developed countries, but have a negative effect in other developing countries.

Are Expenditure Cuts the Only Effective Way to Achieve Successful Fiscal Adjustment

We re-examine whether successful fiscal adjustments are characterized by spending cuts. We apply the Bai & Perron structural break filter instead of ad hoc rules to identify fiscal adjustments in 20 OECD countries. Our estimates using conditional fixed effects logit models suggest that we cannot reject the hypothesis that the change in expenditures is equal to the change in revenues in successful fiscal adjustments. Most political-economy variables considered are not robustly related to successful fiscal adjustments. However, we find evidence that the political fragmentation of government affects the likelihood to observe a successful fiscal adjustment.