Journal ArticleDOI
Political Markets, Bond Markets, and the Effects of Uncertainty: A Cross-National Analysis
TLDR
In this paper, the authors explored the effect that political markets have upon capital markets' performance as measured by the market risks within the long-term government bond markets in nineteen democracies of the Organization for Economic Cooperation and Development (OECD) between 1955 and 1992.Abstract:
One of the critical challenges of contemporary democracy is securing a balance between the markets of representation and the markets of exchange and capital within democracies. This article explores the effect that political markets have upon capital markets' performance as measured by the market risks within the long-term government bond markets in nineteen democracies of the Organization for Economic Cooperation and Development (OECD) between 1955 and 1992. Our theory linking political markets and capital markets will be developed around the logic of transaction cost economics. We will argue that critical aspects of transaction costs within political markets generate corresponding transaction costs and risks within capital markets thereby reducing market efficiency. Specifically, we demonstrate that, based on cross-national evidence drawn from three panels over the time period 1955–1992, stochastic political markets generate transaction costs within long-term government bond markets, the consequences of which are reflected in rising market risk within these capital markets. Our pooled cross-sectional sample confirms that stochasticity in institutional structure presents trade-offs for democracy. Stochasticity may reflect more responsive and generally sensitive representative institutions, but often at the price of risk-laden capital markets. We consider the implications of these findings at the conclusion of the article.read more
Citations
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Journal ArticleDOI
Transaction Cost Economics: An Assessment of Empirical Research in the Social Sciences
TL;DR: A comprehensive review of the empirical literature in transaction cost economics (TCE) across multiple social science disciplines and business fields can be found in this paper, where the authors show how TCE has branched out from its economic roots to examine empirical phenomena in several other areas.
Journal ArticleDOI
Transaction Cost Economics: An Assessment of Empirical Research in the Social Sciences
TL;DR: A comprehensive review of the empirical literature in transaction cost economics (TCE) across multiple social science disciplines and business fields can be found in this paper, where the authors show how TCE has branched out from its economic roots to examine empirical phenomena in several other areas.
Book
Global Capital and National Governments
TL;DR: In this article, the authors present a review and a recasting of financial market influence on government policy in the twenty-first century, focusing on financial market-government relations in emerging economies.
Journal ArticleDOI
Room to move: International financial markets and national welfare states
TL;DR: In this article, the authors evaluate the relationship between international financial markets and government policy outcomes, with a focus on the government bond market in developed democracies, and conclude that governments of developed democracies face strong but narrowly defined financial market pressures.
Posted Content
Political Geography and Stock Returns: The Value and Risk Implications of Proximity to Political Power
TL;DR: The authors show that political geography has a pervasive effect on the cross-section of stock returns and that firms whose headquarters are located in high political alignment index states outperform those located in low political aligned states, both in terms of raw returns and on a risk-adjusted basis.
References
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Book
Institutions, Institutional Change and Economic Performance
TL;DR: Douglass C. North as discussed by the authors developed an analytical framework for explaining the ways in which institutions and institutional change affect the performance of economies, both at a given time and over time.
Posted Content
Institutions, Institutional Change, and Economic Performance
Douglass C. North,John Alt +1 more
TL;DR: In this article, the authors examine the role that institutions, defined as the humanly devised constraints that shape human interaction, play in economic performance and how those institutions change and how a model of dynamic institutions explains the differential performance of economies through time.
Journal ArticleDOI
Transaction-Cost Economics: The Governance of Contractual Relations
TL;DR: For instance, the authors argues that if transaction costs are negligible, the organization of economic activity is irrelevant, since any advantages one mode of organization appears to hold over another will simply be eliminated by costless contracting.
Journal ArticleDOI
The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems
TL;DR: The last two decades indicate corporate internal control systems have failed to deal effectively with these changes, especially slow growth and the requirement for exit as mentioned in this paper, which is a major challenge for Western firms and political systems as these forces continue to work their way through the worldwide economy.
Journal ArticleDOI
What to do (and not to do) with time-series cross-section data
Nathaniel Beck,Jonathan N. Katz +1 more
TL;DR: The generalized least squares approach of Parks produces standard errors that lead to extreme overconfidence, often underestimating variability by 50% or more, and a new method is offered that is both easier to implement and produces accurate standard errors.
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