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31. Export impact on dividend policy for big Colombian exporting firms, 2006–2014

Author:
Federico Merchan
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper studies the impact of exogenous export demand shocks on firms’ dividend policy using firm specific real exchange rate variation as instrumental variable. IV exclusion restriction is plausibly satisfied because real exchange rate shocks were unanticipated -partly explained because of international oil price fluctuation-, and first stage results confirm relevance condition fulfillment. The results indicate that big private Colombian exporting firms decree dividends as a way to mitigate the agency cost generated by exogeneous exports variation via higher free cash flow and cash flow volatility, especially in poor managerial quality firms. Evidence supports agency cost theory and denies signaling.
Topic:
Development, Emerging Markets, Globalization, International Trade and Finance, and Exports
Political Geography:
Global Focus

32. To Russia with Love? The Impact of Sanctions on Regime Support

Author:
Robert Gold, Julian Hinz, and Michele Valsecchi
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Do economic sanctions affect internal support of sanctioned countries’ governments? To answer this question, we focus on the sanctions imposed on Russia in 2014 and identify their effect on voting behavior in both presidential and parliamentary elections. On the economic side, the sanctions significantly hurt Russia’s foreign trade — with regional-level variation. We use trade losses caused by the sanctions as measure for regional sanction exposure. For identification, we rely on a structural gravity model that allows us to compare observed trade flows to counterfactual flows in the absence of sanctions. Difference-in-differences estimations reveal that regime support significantly increases in response to the sanctions, at the expense of voting support of Communist parties. For the average Russian district, sanction exposure increases the vote share gained by president Putin and his party by 13 percent. Event studies and placebo estimations confirm the validity of our results.
Topic:
Globalization, International Trade and Finance, Sanctions, Economy, and Russia-Ukraine War
Political Geography:
Russia and Eurasia

33. Blowback: The Effect of Sanctions on Democratic Elections

Author:
Matthieu Crozet and Julian Hinz
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Sanctions are meant to coerce political adversaries through economic measures. However, evidence for their effectiveness is scarce. In this paper we assess the impact of sanctions on a democracy — France — by studying the electoral consequences of the sanctions and countersanctions imposed between Russia and Western countries. Contrary to most of the existing literature we find clear evidence for exposure to the sanctions to cause an increase in the vote share for pro-Russian (and far-right) candidates during the French 2017 presidential election. Locally, the impact on voting is substantial. Back-of-the-envelope calculations indicate that about 16,300 votes for the main far-right candidate can be directly attributed to the sanctions’ impact. This is the total number of votes cast in a medium-sized French city. It is however not nearly enough to have affected the outcome of the election at the national level.
Topic:
Globalization, International Trade and Finance, Sanctions, and Elections
Political Geography:
Russia, Europe, and France

34. Who is to suffer? Quantifying the impact of sanctions on German firms

Author:
Holger Görg, Anna Jacobs, and Saskia Meuchelbock
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In this paper, we use a novel firm level dataset for Germany to investigate the effect of sanctions on export behaviour and performance of German firms. More specifically, we study the sanctions imposed by the EU against Russia in 2014 in response to the annexation of Crimea and Russia's countermeasures. We find a substantial negative effect on both the extensive and intensive margin of German exports. While the negative effects are strongest for firms exporting products subject to trade restrictions, we provide further evidence on the indirect effects of sanctions. Analysing the impact on broader measures of firm performance, we document that the cost of sanctions is heterogeneous across firms but overall modest. Our results reveal that the negative impact of the shock was concentrated primarily among a small number of firms that were highly dependent on Russia as an export market and those directly affected by the sanctions.
Topic:
Foreign Policy, Globalization, International Trade and Finance, Sanctions, Russia-Ukraine War, and Firm Dynamics
Political Geography:
Russia, Europe, and Germany

35. Patterns of Global and Regional Value Chain Participation in the EAC

Author:
Sebastian Krantz
Publication Date:
02-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Using global Multi-Region Input-Output (MRIO) data from 2005-2015, this paper empirically investigates the extent and patterns by which East African Community (EAC) countries have integrated into Global Value Chains (GVCs) and Regional Value Chains (RVCs). Results imply that the foreign content of exports (I2E) and the share of exports being re-exported (E2R) are stably between 10% and 20% in most EAC countries. Trade in intermediates with the rest of the world remains 12-14 times greater in value-added (VA) terms than the trade in intermediates inside the EAC. During 2005-2015, Kenya expanded its role as a regional supplier of manufactured inputs (higher E2R with EAC partners), and Uganda slightly increased its agricultural input to the Kenyan and Rwandan food processing sectors. Overall, however, a downstream shift is evident, by which more VA (both domestic and foreign) is used for the production of final goods while maintaining high levels of exports in primary agriculture and mining. This shift goes alongside a loss of comparative advantage in manufacturing in all EAC countries apart from Kenya. Econometric analysis suggests that higher I2E and E2R shares increase GDP with an average elasticity of ≥ 0.25 over 2 years. Estimates for manufacturing sectors were slightly higher at elasticities ≥ 0.3 in response to E2R shifts. These results imply that policy measures to increase manufacturing competitiveness and promote more horizontal RVCs would benefit EAC economic growth in the medium run.
Topic:
Globalization, Regional Integration, and Global Value Chains
Political Geography:
Africa

36. Africa’s Businesswomen – Underfunded or Underperforming?

Author:
Charles Ackah, Holger Görg, Aoife Hanley, and Cecília Hornok
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
While the recent success of Africa’s ‘Lionesses’ – successful female entrepreneurs - is internationally celebrated, less is known about how liquidity can fuel the success of the ‘Lionesses’ and other businesswomen. Using information from a panel of over 800 male- and female-owned businesses in Ghana (ISSER-IGC survey), we capture a measure of underfunding, in addition to data on supplier credit, equity and other finance sources. Our regressions reveal a female-to-male productivity gap of between -11 to -19 percent, values similar to estimates for other African countries. However, when the relationship between gender and productivity is mediated by financial constraints, the gender performance gap disappears. Accordingly, female business-owners who indicate that funding is not a problem, are associated with higher productivity than males, all things equal. In a finding new to the literature, our regressions reveal the importance of supplier credit for Africa’s businesswomen.
Topic:
Globalization, International Trade and Finance, Women, Business, Productivity, and Liquidity
Political Geography:
Africa and Ghana

37. Cities as global actors: Bringing governance closer to the people

Author:
Katja Creutz
Publication Date:
02-2023
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
Globalization and extensive urbanization worldwide have brought cities to the forefront of global governance in a multilateral system designed and created for states. Cities have come to exercise power due in part to the inadequacy or ineffectiveness of inter-state action, but also because their democratic nature and immediate connection to the population make them legitimate actors. Cities are also home to many problems of a global nature, such as greenhouse gas emissions, pandemics, and sustainability. This makes them uniquely situated to address these challenges. City diplomacy has become a prevalent feature in many global policy issues, ranging from climate change to development cooperation. The primary tool through which cities act is networking, with hundreds of global city networks pursuing the interests and values of their constituencies. By demanding a seat at the table where global affairs are decided upon, cities challenge and complement the state-based international order, in addition to which they stretch the basic concepts and constructs of both international relations and international law.
Topic:
Globalization, International Law, Governance, Democracy, and Cities
Political Geography:
Global Focus

38. Istanbul Journal of Economics: Volume 73 Issue 2

Author:
Gökhan Karabulut
Publication Date:
12-2023
Content Type:
Journal Article
Journal:
Istanbul Journal of Economics
Institution:
Istanbul University Faculty of Economics
Abstract:
Istanbul Journal of Economics-İstanbul İktisat Dergisi is an open access, peer-reviewed, scholarly journal published two times a year in June and December. It has been an official publication of Istanbul University Faculty of Economics since 1939. The manuscripts submitted for publication in the journal must be scientific and original work in Turkish or English. Being one of the earliest peer-reviewed academic journals in Turkey in the area of economics, Istanbul Journal of Economics-İstanbul İktisat Dergisi aims to provide a forum for exploring issues in basicly economics and publish both disciplinary and multidisciplinary articles. Economics is the main scope of the journal. However, multidisciplinary and comparative approaches are encouraged as well and articles from various social science areas such as sociology of economics, history, social policy, international relations, financial studies are welcomed in this regard. The target group of the journal consists of academicians, researchers, professionals, students, related professional and academic bodies and institutions.
Topic:
Debt, Economics, Globalization, Tourism, Capitalism, Finance, Ethics, Economic Growth, Tax Systems, Macroeconomics, and Unemployment
Political Geography:
Turkey and Middle East

39. Anti-fragmentation: an incomplete diagnosis and wrong solution

Author:
Marek Dąbrowski
Publication Date:
03-2023
Content Type:
Case Study
Institution:
Center for Social and Economic Research - CASE
Abstract:
A study by Marek Dąbrowski (CASE) entitled “Anti-fragmentation: an incomplete diagnosis and wrong solution”, requested by the European Parliament's Committee on Economic and Monetary Affairs (ECON), was published in the Monetary Dialogue Papers series in September 2022. Since the 1990s, the public debt-to-GDP ratio has gradually increased in almost all current euro area member countries. In most of them, it now exceeds the Maastricht reference value of 60%, in several of them – 100%, and in a few cases – even more. It creates a severe challenge to the stability of public finances, the entire financial system and monetary stability in the euro area being also the primary cause of the so-called fragmentation. The study begins with an analysis of the excessive public debt in the euro area. An overview of the fiscal stance in the euro area as a whole and, separately, in individual Member States from 1997 to 2021 is complemented with the analysis of mechanisms of fiscal discipline – again on the EU/euro area level and the national level separately. Three causes of the ineffectiveness of these mechanisms are then identified: (1) political economy factors at the national level; (2) political economy factors at the European level; and (3) fallacies of economic science. The next part concerns ECB involvement in the sovereign debt market in the euro area. A historical analysis is conducted starting from the period of the EFC (2010–2015) to quantitative easing of 2014-2022. Two important periods from recent history are detailed - additional quantitative easing of the pandemic era (2020–2022) and the turn towards monetary policy tightening in 2022. In the last part of the study, the author argues that the problem of “fragmentation” is wrongly formulated. It is a secondary symptom of the excessive sovereign indebtedness in some euro area economies. It should be remedied by fiscal policy measures (fiscal consolidation) rather than by the ECB’s quasi-fiscal activities. The latter is not consistent with its legal status, compromises its independence (and credibility of the euro), and undermines its ability to deliver on its price stability mandate. When a targeted market intervention is necessary, it should be provided by the European Stability Mechanism, the institution created for this purpose in 2012, instead of the ECB.
Topic:
Globalization, European Union, Finance, Trade, and Economic Integration
Political Geography:
Europe

40. Global value chains: Potential synergies between external trade policy and internal economic initiatives to address the strategic dependencies of the EU

Author:
Agnieszka Skowronek and Jan Hagemejer
Publication Date:
03-2023
Content Type:
Case Study
Institution:
Center for Social and Economic Research - CASE
Abstract:
Global value chains enable two-thirds of international trade, notably for the EU. The EU wants to preserve its commercial links with third countries and organisations to make up for trade disruptions. This study examines sustainable supply of raw materials, commodities, and critical goods using the EU's Open Strategic Autonomy concept. It examines which raw material are crucial for sustainable supply and necessary for the green transition. The paper examines EU internal legislation and international cooperation instruments to determine the EU's disruption risk. It evaluates the economic impact of EU preferential trade agreements on raw material availability. The study illustrates the political and economic relevance of raw material partnerships and plurilateral and bilateral trade agreements. It analyses the EU's toolbox for safeguarding its interests and making independent trade choices to counteract other actors' unfair practices and intervention. Finally, the paper examines regulatory frameworks, international alliances, and activities to find ways to strengthen global value chains in critical EU industries.
Topic:
Globalization, European Union, Trade, Global Value Chains, and Economic Integration
Political Geography:
Europe