Scottish Journal of Political Economy

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Publisher:
Wiley
Publication date:
2021-02-01
ISBN:
0036-9292

Issue Number

Latest documents

  • Determinants of regional business cycle synchronization in Greece

    We assess the determinants of regional business cycle synchronization in Greece vis‐à‐vis the national reference business cycle, using NUTSII annual data. The computation of the time‐varying synchronization is based on the dynamic estimate of a conditional variance–covariance model and subsequently, a panel regression model is used to evaluate its determinants. The findings show that island regions, industrial structure, imports, savings and disposable income are the key determinants, based on the GVA business cycle synchronization vis‐à‐vis the national reference cycle. We also assess the determinants of employment synchronization (vis‐à‐vis the national employment level) and we find that regions with higher disposable income and public spending tend to drive the level of synchronization. Turning to the inter‐regional synchronization, we provide evidence that investments, disposable income and employment drive the GVA business cycle synchronization, whereas the employment synchronization is determined by the level of imports, disposable income and public spending, as well as by the status of regions as island economies. We further show that the Greek economic crisis during the period 2010–2018 has diminished or eliminated the effects of the aforementioned drivers, suggesting that during the said period, synchronization was mainly driven by the wider economic conditions. These findings lead to important policy implications, which are thoroughly discussed.

  • Effect of international travel sanctions on global tourist arrivals

    Travel sanctions are a strategic diplomatic tool that are generally preferred by sanctioning countries to other invasive actions because they can reduce or avoid casualties and losses and achieve policy goals. The present study investigates the relationship between travel sanctions and the number of international tourist arrivals by employing a gravity model from 1995 to 2015. The empirical results reveal that imposing international travel sanctions leads to a decrease in the number of tourist arrivals. Moreover, sanctions between developed countries have more influential effects than those between developing countries.

  • Monetary policy and heterogeneous price effects in the United Kingdom

    This paper examines the heterogeneous effects of monetary policy on consumer prices in the United Kingdom. We estimate a proxy Structural Vector Autoregressive (SVAR) model, using extended high‐frequency monetary surprises from Cesa‐Bianchi et al. (European Economic Review, 123, 2020, 103375) to instrument shifts in UK monetary policy. We then analyze the impulse responses for various components of the UK Consumer Price Index. Our findings reveal that while monetary policy tightening leads to a persistent decline in aggregate consumer prices, the impact on disaggregated components is highly heterogeneous. Notably, we observe that energy price changes offset movements in food, beverage, and tobacco prices, resulting in identical responses of core and headline consumer CPIH inflation measures. The contrasting effects across different CPI components highlight the importance of examining disaggregated data when assessing the transmission of monetary policy to consumer prices.

  • Partisanship, elections and lockdowns: Evidence from US states

    In this article, we use state‐level variation in Senate elections and partisanship to understand the variation in lockdown characteristics in the US. We argue that the state‐level decision makers and their parties weigh off the perceived political costs in an election year of a depressed economy against risks to public health. Democrats and Republicans, and their voters, vary in the weights they attach to these costs and benefits. We are thus exploring the marginal effect of the party–election interaction after accounting for other likely drivers of variations in lockdown characteristics. We find that Republican states with an election have less strict and shorter lockdowns compared to Democratic states with an election. Our results have implications for the communication of pandemic policies, including vaccination strategies.

  • House price convergence in the very long run

    We examine the house price convergence across 12 OECD countries over the period 1905–2016. Using novel quantile unit root tests which allow for smooth breaks via a Fourier expansion series, we find that nine countries show the presence of relative house price convergence at all the quantiles. Focusing on several specific quantiles, 11 countries have significant convergence tendencies. Moreover, there are four definite patterns related to shocks in the relative house prices across quantiles.

  • Issue Information
  • Can the military be a better manager of the economy?

    Pakistan has struggled for a political system suitable for its postindependence development; however, repeated struggles between democracy and dictatorship have slowed Pakistan's economic growth. I quantified the impact of military dictatorship on Pakistan's economy from 1999 to 2008 using synthetic control methods. I found that while the average annual GDP per capita growth grew during the military dictatorship, it was four times lower than synthetic Pakistan's. I conclude that the military did not help Pakistan with its economic malaise. The increase in military expenditure and the prevalence of terrorism due to the military dictatorship may have hindered Pakistan's economic growth.

  • Cross‐ownership, business dynamism, and wage inequality in general equilibrium

    This study examines the distributive and welfare effects of cross‐ownership by firms in a general equilibrium economy on the product and factor markets. The cross‐ownership of equities, such as collusion, tends to be anticompetitive, thereby narrowing the wage gap between skilled and unskilled labor in the short term with the existing number of firms. In the capital market, reducing capital cost through cross‐ownership causes new firms to enter the market in the long term. This firm‐entry effect induced by cross‐ownership through an increase in the number of competitors generates a competitive force that exacerbates wage inequality and reduces welfare in the economy.

  • Can local and global geopolitical risk predict governments' military spending behaviour? International evidence

    Geopolitical risk, encompassing wars, terrorism, and tensions between states, exerts a significant impact on global affairs. Previous studies have examined the relationship between geopolitical risk and military spending. However, these studies were limited by certain shortcomings in the measurement tools used to assess geopolitical risk. The introduction of a new geopolitical risk index, leveraging textual analysis technology, offers a way to overcome some of these limitations. Despite this advancement, research exploring the predictive capacity of this geopolitical risk index on military spending behaviour remains scarce. Specifically, no previous studies have investigated the predictive power of both local and global geopolitical risk indices on military spending behaviour. To bridge this gap, this study employs panel VAR analysis for 34 countries worldwide, spanning from 1993 to 2022. The results indicate that the military spending behaviour of countries is significantly influenced by local geopolitical risk rather than global geopolitical risk. Furthermore, the findings also reveal that an increase in geopolitical risk during a given year can predict military spending behaviour in the subsequent 2 years. These findings provide valuable insights for policymakers seeking to understand governments' behaviour regarding military spending.

  • Variation in labor skills and offshoring across time zones

    We check the role of time‐zone difference on offshoring of service tasks when the skill of labors varies between the partner countries. We frame a model where partner countries are located in non‐overlapping time zones, and the skill level of the partner‐country labors is lower. In our model, service production is divided into two sequential stages, and output is a supermodular function of the skill of labors and time. The problem of the producers is to choose between domestic production and offshoring. Domestic production employs high‐skill labors though the time management is inefficient. On the other hand, offshoring to a non‐overlapping time zone helps to work round the clock and reduce the cost, but the lower expertise of skilled labor lowers the output. In such a framework, we check conditions for beneficial offshoring. The condition derived in our analysis provides combinations of skill and time that can make offshoring beneficial. Results show that offshoring across time zones is beneficial even when the complexity of stages of production vary. However, only the relatively less‐critical task is offshored. We further find that availability of domestic low‐skill labor does not benefit the firm, while foreign low‐skill labor may be beneficially utilized through time‐zone exploitation.

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