Research Papers – Page 7 – Economics for Policy

The Open Society Assesses its Enemies: Shocks, Disasters and Terrorist Attacks

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This paper conducts a systematic investigation of the incidence and economic costs of terrorist attacks at the country level. We use newly assembled data sets on terrorist attacks, natural disasters and currency crises to answer three different questions: what are the determinants of terrorism; is there an output cost following a terrorist attack; and is that cost larger or smaller in the case of democracies. (…)

The Dynamics of Inflation and Currency Substitution in a Small Open Economy

Miguel Lebre Freitas

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This paper analyzes the relationship between money and inflation in a small open economy, where domestic and foreign currencies are perfect substitutes as means of payment. It is shown that, if the path of domestic money supply is such that individuals find it optimal to change the currency in which transactions are settled, there will be an adjustment period during which domestic inflation adjusts to equal the foreign inflation rate. (…)

Does Right or Left Matter? Cabinets, Credibility and Fiscal Adjustments

José Tavares

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This paper tests the widely held assumption that left-wing cabinets favor higher public spending and examines whether cabinet ideology affects the persistence of major fiscal adjustments. In a panel of large fiscal adjustments in OECD countries during the last 40 years, we find evidence that left-wing and right-wing cabinets are partisan: the left tends to reduce the deficit by raising tax revenues while the right relies mostly on spending cuts. (…)

How Democracy Affects Growth

José Tavares

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This paper introduces a new methodology to examine the empirical relationship between democracy and economic growth. Democratic institutions are assumed to a!ect growth through a series of channels. We specify and estimate a full system of equations determining growth and the channel variables. (…)