Theory

    Papers & Opinions

    Empirics | Financial markets | Theory

    Political Cycles and Stock Returns

    Paper

    Posted on 18 July 2021

    By Lubos Pastor

    We develop a model of political cycles driven by time-varying risk aversion. Agents choose to work in the public or private sector and to vote Democrat or Republican. In equilibrium,...
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    Electoral politics | Financial markets | Theory

    Inequality Aversion, Populism, and the Backlash Against Globalization

    Paper

    Posted on 12 July 2021

    By Lubos Pastor

    Motivated by the recent rise of populism in western democracies, we develop a tractable equilibrium model in which a populist backlash emerges endogenously in a strong economy. In the model,...
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    Central banking | Political institutions | Theory

    The Euro as a Diverse Monetary Union

    Paper

    Posted on 21 May 2021

    By Oscar Soons

    We analyze the political economy causes and consequences of a monetary unification among countries with different institutional quality. Before a common currency countries with stronger institutions have more efficient public...
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    Banking | Electoral politics | Theory

    The Political Economy of Prudential Regulation

    Paper

    Posted on 21 May 2021

    By Magdalena Rola-Janicka

    This paper introduces a voting model into a setting with negative borrowing externalities to study voter preferences for prudential regulation. Voters internalize the general equilibrium impact of prudential policy on...
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