We identify exogenous variation in incumbent policymakers' re-election probabilities and explore empirically how this variation affects the incumbents' investment in physical capital. Our results indicate that a higher re-election probability leads to higher investments, particularly in the...

Galí, López-Salido, and Vallés (2007) suggest that because part of the population follow a rule-of-thumb by which they spend their entire disposable income each period, private consumption responds positively to deficit-financed increases in government spending. Key to this result is a...

Rational choice theories of electoral participation stress that an individual's decision to vote depends on her expected net benefit from doing so. If this instrumental motive is relevant, then turnout should be higher in elections where more is at stake. We test this prediction, by studying how...

Recent studies find that shocks to the marginal efficiency of investment are a main driver of business cycles. Yet, they struggle to explain why consumption co-moves with real variables such as investment and output, which is a typical feature of an empirically recognizable business cycle. In...

We aim to explain petro populism - the excessive use of oil revenues to buy political support. To reap the full gains of natural resource income politicians need to remain in office over time. Hence, even a purely rent-seeking incumbent who only cares about his own welfare, will want to provide...

We develop a model of credit rating agencies (CRAs) based on reputation concerns. Ratings affect investors' choice and, thereby, also issuers' access to funding and default risk. We show that - in equilibrium - the informational content of credit ratings is inferior to that of CRAs' private...

If central banks value the ex-post accuracy of their forecasts, previously announced interest rate paths might affect the current policy rate. We explore whether this "forecast adherence" has influenced the monetary policies of the Reserve Bank of New Zealand and the Norges Bank, the two central...

This paper explores if economic uncertainty alters the macroeconomic influence of monetary policy. We consider several measures of U.S. economic uncertainty, and estimate their interaction effects with monetary policy shocks as identified through structural vector autoregressions. We find that...

We study the interaction between monetary policy and household debt dynamics. To this end, we develop a dynamic stochastic general equilibrium model where household debt is amortized gradually, and only new loans are constrained by the current value of collateral. Long-term debt implies that...

We use a simple quantitative asset pricing model to "reverse-engineer" the sequences of stochastic shocks to housing demand and lending standards that are needed to exactly replicate the boom-bust patterns in U.S. household real estate value and mortgage debt over the period 1995 to 2012....