Article

Political Limits to Globalization

American Economic Review (Impact Factor: 2.69). 05/2010; 100(2):83-88. DOI: 10.2139/ssrn.1540243
Source: RePEc

ABSTRACT

We introduce a new hybrid approach to joint estimation of Value at Risk (VaR) and Expected Shortfall (ES) for high quantiles of return distributions. We investigate the relative performance of VaR and ES models using daily returns for sixteen stock market indices (eight from developed and eight from emerging markets) prior to and during the 2008 financial crisis. In addition to widely used VaR and ES models, we also study the behavior of conditional and unconditional extreme value (EV) models to generate 99 percent confidence level estimates as well as developing a new loss function that relates tail losses to ES forecasts. Backtesting results show that only our proposed new hybrid and Extreme Value (EV)-based VaR models provide adequate protection in both developed and emerging markets, but that the hybrid approach does this at a significantly lower cost in capital reserves. In ES estimation the hybrid model yields the smallest error statistics surpassing even the EV models, especially in the developed markets.

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    • "Research shows however that macroeconomic policies cannot be separated from national and international political policies. The failure of World Bank adjustment programs is largely explained by its inability to take into account the major political factors operating in a country (Dollar & Sevensson, 1998; Acemoglu & Yared, 2010). Critics of globalization through economic integration argue that most of the " star globalizers " of 1990s era did not pursue the above mentioned free-trade theory tilt during decades preceding 1990. "
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    ABSTRACT: The economics and philosophy of Globalization are generally not discussed together. This paper assesses the claims of economic prosperity through economic integration in the backdrop of cultural, political and social value system implications of Globalization.
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    • "Most recently, Acemoglu and Yared (2010) show that militarism (i.e., an increase in military spending) disrupts economic integration even in the absence of actual military conflicts. Our paper builds on this Acemoglu and Yared result by confirming that financial markets impute political risk and by showing that these effects can be large even during peacetime. "
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    ABSTRACT: We examine the effects of party platforms on the economic opportunities of firms using a unique data set from a political prediction market in Taiwan, a country with two dominant parties whose political cleavage derives mainly from a single issue: the "One China Principle". We find that during the 2008 Presidential campaign, the share price of Taiwanese firms with investments in the mainland responded strongly and positively to a positive electoral outlook for the KMT, the party which advocates lifting caps on cross-strait investment in mainland China. The response is strongest for those firms who have already hit their caps.
    Full-text · Article · Aug 2011 · Journal of Public Economics
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    • "Most recently, Acemoglu and Yared (2010) show that militarism (i.e., an increase in military spending) disrupts economic integration even in the absence of actual military conflicts. Our paper builds on this Acemoglu and Yared result by confirming that financial markets impute political risk and by showing that these effects can be large even during peacetime. "
    [Show abstract] [Hide abstract]
    ABSTRACT: We examine the effects of party platforms on the economic opportunities of firms using a unique data set from a political prediction market in Taiwan, a country with two dominant parties whose political cleavage derives mainly from a single issue: the "One China Principle". We find that during the 2008 Presidential campaign, the share price of Taiwanese firms with investments in the mainland responded strongly and positively to a positive electoral outlook for the KMT, the party which advocates lifting caps on cross-strait investment in mainland China. The response is strongest for those firms who have already hit their caps.
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