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This paper is one of the first to analyse political influence on state-owned savings banks in a developed country with an established financial market: Germany. Combining a large dataset with financial and operating figures of all 457 German savings banks from 1994 to 2006 and information on over 1,250 local elections during this period we investigate the change in business behavior around elections. We find strong indications for political inflence: the probability that savings banks close branches, lay-off employees or engage in merger activities is significantly reduced around elections. At the same time they tend to increase their extraordinary spendings, which include support for social and cultural events in the area, on average by over 15%. Finally, we find that savings banks extend significantly more loans to their corporate and private customers in the run-up to an election. In further analyses, we show that the magnitude of political influence depends on bank specific, economical and political circumstances in the city or county: political influence seems to be facilitated by weak political majorities and profitable banks. Banks in economically weak areas seem to be less prone to political influence.
We investigate whether the bank crisis management framework of the European banking union can effectively bar the detrimental influence of national interests in cross-border bank failures. We find that both the internal governance structure and decision making procedure of the Single Resolution Board (SRB) and the interplay between the SRB and national resolution authorities in the implementation of supranationally devised resolution schemes provide inroads that allow opposing national interests to obstruct supranational resolution. We also show that the Single Resolution Fund (SRG), even after the ratification of the reform of the European Stability Mechanism (ESM) and the introduction of the SRF backstop facility, is inapt to overcome these frictions. We propose a full supranationalization of resolution decision making. This would allow European authorities in charge of bank crisis management to operate autonomously and achieve socially optimal outcomes beyond national borders.
Anxiety and politics
(2017)
The English version of this article was first published in 1957. The journal tripleC: Communication, Capitalism & Critique republished it 60 years later in 2017. In this essay, Franz L. Neumann discusses the role of anxiety in politics. The article asks: How does it happen that the masses sell their souls to leaders and follow them blindly? On what does the power of attraction of leaders over masses rest? What are the historical situations in which this identification of leader and masses is successful, and what view of history do the men have who accept leaders? For answering these questions, the author suggests a combination of political economy, Freudian political psychology, and ideology critique. He sees anxiety in the context of alienation. Alienation is analysed as a multidimensional phenomenon consisting of economic, political, social and psychological alienation. Neumann introduces the notions of Caesaristic identification, institutionalised anxiety and persecutory anxiety. The essay shows that fascism remains an actual threat in capitalist societies.
There have been numerous attempts to reform the Economic and Monetary Union (EMU) after the Great Recession, however the reform success varies greatly among sub-fields. Additionally, the political science research community has engaged a diverse set of theory- driven explanations, causal mechanisms, and variables to explain respective reform success. This article takes stock of reform policies in the EMU from two angles. First, it outlines distinct theoretical approaches that seek to explain success and failure of reform proposals and second, it surveys how they explain policy output and policy outcome in four policy subfields: financial stabilization, economic governance, financial solidarity, and cooperative dissolution. Finally, the article develops a set of explanatory factors from the existing literature that will be used for a Qualitative Comparative Analysis (QCA).
The use of evidence and economic analysis in policymaking is on the rise, and accounting standard setting and financial regulation are no exception. This article discusses the promise of evidence-based policymaking in accounting and financial markets as well as the challenges and opportunities for research supporting this endeavor. In principle, using sound theory and robust empirical evidence should lead to better policies and regulations. But despite its obvious appeal and substantial promise, evidence-based policymaking is easier demanded than done. It faces many challenges related to the difficulty of providing relevant causal evidence, lack of data, the reliability of published research, and the transmission of research findings. Overcoming these challenges requires substantial infrastructure investments for generating and disseminating relevant research. To illustrate this point, I draw parallels to the rise of evidence-based medicine. The article provides several concrete suggestions for the research process and the aggregation of research findings if scientific evidence is to inform policymaking. I discuss how policymakers can foster and support policy-relevant research, chiefly by providing and generating data. The article also points to potential pitfalls when research becomes increasingly policy-oriented.
We show that average excess returns during the last two years of the presidential cycle are significantly higher than during the first two years: 9.8 percent over the period 1948 – 2008. This pattern in returns cannot be explained by business-cycle variables capturing time-varying risk premia, differences in risk levels, or by consumer and investor sentiment. In this paper, we formally test the presidential election cycle (PEC) hypothesis as the alternative explanation found in the literature for explaining the presidential cycle anomaly. PEC states that incumbent parties and presidents have an incentive to manipulate the economy (via budget expansions and taxes) to remain in power. We formulate eight empirically testable propositions relating to the fiscal, monetary, tax, unexpected inflation and political implications of the PEC hypothesis. We do not find statistically significant evidence confirming the PEC hypothesis as a plausible explanation for the presidential cycle effect. The existence of the presidential cycle effect in U.S. financial markets thus remains a puzzle that cannot be easily explained by politicians employing their economic influence to remain in power. JEL Classification: E32; G14; P16 Keywords: Political Economy, Market Efficiency, Anomalies, Calendar Effects
This paper analyses economic power, state power and ideological power in the age of Donald Trump with the help of critical theory. It applies the critical theory approaches of thinkers such as Franz Neumann, Theodor W. Adorno and Erich Fromm. It analyses changes of US capitalism that have together with political anxiety and demagoguery brought about the rise of Donald Trump. This article draws attention to the importance of state theory for understanding Trump and the changes of politics that his rule may bring about. It is in this context important to see the complexity of the state, including the dynamic relationship between the state and the economy, the state and citizens, intra-state relations, inter-state relations, semiotic representations of and by the state, and ideology. Trumpism and its potential impacts are theorised along these dimensions. The ideology of Trump (Trumpology) has played an important role not just in his business and brand strategies, but also in his political rise. The (pseudo-)critical mainstream media have helped making Trump and Trumpology by providing platforms for populist spectacles that sell as news and attract audiences. By Trump making news in the media, the media make Trump. An empirical analysis of Trump’s rhetoric and the elimination discourses in his NBC show The Apprentice underpins the analysis of Trumpology. The combination of Trump’s actual power and Trump as spectacle, showman and brand makes his government’s concrete policies fairly unpredictable. An important question that arises is what social scientists’ role should be in the conjuncture that the world is experiencing.
his articles discusses and contextualises tripleC's republication of Franz L. Neumann's essay Anxiety and Politics. It provides some background information on Neumann's life and works. The essay ascertains that in the age of new nationalisms, rising right-wing authoritarianism and authoritarian capitalism, Franz L Neumann's works can help us to critically understand contemporary society.
In this paper, we examine how the institutional design affects the outcome of bank bailout decisions. In the German savings bank sector, distress events can be resolved by local politicians or a state-level association. We show that decisions by local politicians with close links to the bank are distorted by personal considerations: While distress events per se are not related to the electoral cycle, the probability of local politicians injecting taxpayers’ money into a bank in distress is 30 percent lower in the year directly preceding an election. Using the electoral cycle as an instrument, we show that banks that are bailed out by local politicians experience less restructuring and perform considerably worse than banks that are supported by the savings bank association. Our findings illustrate that larger distance between banks and decision makers reduces distortions in the decision making process, which has implications for the design of bank regulation and supervision.
In this paper, we examine how the institutional design affects the outcome of bank bailout decisions. In the German savings bank sector, distress events can be resolved by local politicians or a state-level association. We show that decisions by local politicians with close links to the bank are distorted by personal considerations: While distress events per se are not related to the electoral cycle, the probability of local politicians injecting taxpayers’ money into a bank in distress is 30 percent lower in the year directly preceding an election. Using the electoral cycle as an instrument, we show that banks that are bailed out by local politicians experience less restructuring and perform considerably worse than banks that are supported by the savings bank association. Our findings illustrate that larger distance between banks and decision makers reduces distortions in the decision making process, which has implications for the design of bank regulation and supervision.