Tuvana Pastine

Emerging Market Debt: Measuring Credit Quality and Examining Relative Pricing

We investigate the pricing of ‘Brady’ bonds that are issued by the governments of five developing countries as part of debt and debt service reduction agreements. We first present a measure of credit quality that takes account of the individual features of each bond and is comparable across bonds, across issuers, and over time. We then examine the evolution of the credit quality of each debt instrument from 1990 until the beginning of 2000. Next, we present evidence of a profitable trading strategy that exploits the information contained in this measure of credit quality.

Incumbent-quality advantage and counterfactual electoral stagnation in the U.S. Senate

This article examines the extent to which electoral selection based on candidate quality alone can account for the pattern of re-election rates in the US Senate. In the absence of officeholder benefits, electoral selection is simulated using observed dropout rates from 1946 to 2010. This provides a benchmark for the re-election rate that would be generated by incumbent quality advantage alone. The simulation delivers a re-election rate that is almost identical to the observed rate prior to 1980, at around 78 per cent. In the later subsample, quality-based selection generates a re-election rate that is seven percentage points lower than observed. The divergence in the re-election rates in the later subsample is consistent with the findings of vote margin studies that indicate rising incumbency advantage due to officeholder benefits. In addition, it is found here that the quality-based selection first-term re-election rate is significantly lower than the observed first-term re-election rate. This result supports sophomore surge vote margin studies of officeholder benefits.

Coordination in Markets with Consumption Externalities: Advertising and Product Quality

In this paper we study advertising in markets with positive consumption externalities. In such markets, we show that firms may engage in advertising competition to coordinate consumer expectations on their own brand as long as they produce goods of similar quality. The firm with the lower-quality product has a greater incentive to advertise. Hence in equilibrium, the lower-quality product will often be more popular.

Soft Money and Campaign Finance Reform

We analyze special interest influence on policy when political contributions are capped but the regulation contains soft-money loopholes. The politician chooses between two policy options. We define special interest influence as the probability the politician chooses the policy he would not have chosen in the absence of contributions. Any binding cap reduces special interest influence but the effect may be nonmonotonic. A ban on contributions can result in greater special interest influence than a binding but nonzero cap. The results may also have implications for the policy response to the 2010 Supreme Court ruling on Citizens United v. FEC.

Migration, intermediate inputs and real wages

To examine the effects of immigration on real wages it is important to focus on the interaction between the labour and intermediate input markets. Immigration can lead to more extensive exploitation of external and internal efficiencies in other input markets, resulting in higher real wages in the destination country.