Policy Stance Research Articles

The Double-Edged Sword of Carrots: Exploring Their Simultaneous Effects on Threat and Imposition Stages of Economic Sanctions

This article investigates the effectiveness of incentive-based policies, or “carrots,” during the threat and imposition stages of sanctions, with a focus on addressing potential endogeneity arising from self-selection processes in designing sanctions strategy. Successful sanctions require the sender’s sustained commitment until the target concedes, demonstrating a consistent policy stance and a readiness to bear associated costs. Carrots utilized during the threat stage represent a tit-for-tat approach, complementing the sender’s consistent policy stance of conditionally combining both carrots and sticks, and potentially reducing the perception of bluffing, thereby increasing target compliance probability. However, introducing carrots during the imposition stage may be misinterpreted as a sudden shift towards appeasement, undermining policy coherence and indicating a lack of capacity or willingness to enforce sanctions. This perception could lead the target to await sanctions removal, resulting in a failed outcome. Following the mitigation of potential sender self- selection into carrots, the findings emphasize the importance of combining carrots with sanctions threats. Nonetheless, caution is advised when using carrots as a substitute for ineffective punitive strategies, as adverse effects may arise.

Drivers of fintech policy evolution: the role of policy learning and institutions

Despite the increasing importance of financial technology (fintech), there is a gap in research on the drivers of countries’ fintech policy stances. This article contributes to theoretical discussions in the public policy literature by outlining how policy learning and institutions may affect the evolution of national fintech policy stances. To test our theoretical framework, we analyse a comparative case study of the three Baltic states, which have experienced diverging fintech policy trajectories on a national level. We find that policy learning has played a crucial role in fintech policy evolution in the Baltic states. Various fintech-related scandals have revealed policy failures, leading policy makers to adopt a more cautious stance. The evolution of fintech policy stances also interacts with the institutional architecture of financial supervision: an integrated model is more conducive to a proactive stance than a fragmented model. In this way, our article addresses the theoretical and empirical research gap regarding the drivers of fintech policy by outlining how policy learning and institutions can affect its evolution.

Fiscal stance role for ECB monetary policy

The objective of this paper is to ascertain the presence of a crucial connection between euro area fiscal stance and ECB monetary policy. To achieve this, we employ the thick modelling approach for the Generalised method of moments to estimate ECB reaction functions with and without a projected fiscal deficit indicator from 2001 until 2022. The results reveal that the actions of the ECB have exhibited desirable effects of stabilising monetary policy, while the projected fiscal deficit was usually not statistically significant in explaining the ECB’s monetary policy stance. However, the sign of fiscal deficit coefficient was positive, implying a counter-cyclical nature of monetary policy with respect to the fiscal stance. This effect has become more evident since 2012, suggesting that the ECB might be taking into account euro area fiscal deficits as providing some indications for potential inflationary risks. Overall, these findings speak against the fiscal dominance or repression regime being prevalent in the euro area.

Agricultural policy and crop location: Long‐run output and spatial climate risk consequences

AbstractChoices by farmers—notably what crop to grow, where—are not only influenced by spatially sensitive environmental attributes but also economic factors that respond to changes in government policies. In South Africa, the policy stance toward agriculture swung toward an extended period of support spanning the middle of the 20th century. Subsequently, the agricultural support policies were eliminated in the post‐Apartheid period beginning in the 1990s. Using a purpose‐built, spatially explicit data set for South African agriculture spanning the period 1918–2015, we show these structural shifts in agricultural policy regimes concord with major shifts in national corn price trends and variability, and the area planted to corn (accounting for half the country's cropped area). More subtly, and much less studied, we reveal that these switching policy regimes also aligned with changes in the location of crop production, with pronounced consequences for crop output and climate risk. At its peak, policy‐aligned crop movement in South Africa reduced corn output by between 7.9% and 15.3%, and placed production in areas with reduced and riskier rainfall patterns. Upon removal of the policy distortions, the decline in total corn area continued, and the crop largely reverted to its predistorted, less climate‐risky geographical locations. The geographical sensitivities of the agricultural policy–production–climate risk nexus we reveal suggest these locational aspects deserve more concerted analytical and policy design attention, especially in light of the longer run, spatially sensitive production and food security risk implications of the changing climate realities facing agriculture the world over.

Higher education finance and success rate in US states: An insight from state-level data

We investigate the nexus between education spending and education success measured through attainment rate for 50 US states. Our emphasis is mainly to use state-level data on education spending which occur in general and specific terms. The outcome from our finding can be summarized as follows. One, education spending constitutes a significant factor that motivates people for higher education and it is a motivating factor that ensures completion. Two, we establish further emphasis with the types of spending and its differing stance on education success. While general spending plays important roles in this regard, specific (particularly spending on capital project) is found to reverse the success rate. This suggests that capital spending on education necessarily needs to reach a defined threshold to incite positive check in the current nexus. Three, the magnitude of impact for total spending is lower than when general spending is used, which make the impact of capital spending more conspicuous. Lastly, we also establish asymmetric impact of spending across differing categories between Black Belt and Non-Black Belt states. While the spending pattern is significant for both regions, the magnitude is higher for the Black Belt region indicating the tendency of the region to benefit more when spending improves. We further offer important policy stance.

‘Sellers’ Inflation’ and Monetary Policy Interventions: A Critical Analysis

ABSTRACT This paper analyses the phenomenon of ‘sellers’ inflation’, that is to say, the increases in consumer prices as a result of firms’ decision to increase their selling prices as much as possible in the aftermath of the war in Ukraine. This analysis focuses also on central banks’ responses to such inflationary pressures, which monetary authorities have been trying to limit with several increases in their policy rates of interest. The paper explains the major shortcomings of this monetary policy strategy and its negative consequences for a number of economic agents. The last section puts forward an alternative economic policy stance, proposing in particular a series of ‘green’ monetary policy interventions to address these inflationary pressures in the general interest for the common good.

Dynamics of deposit dollarization in Turkey

<p style="text-align:justify"><span style="font-size:16px"><span style="font-family:Times New Roman,Times,serif"><span dir="ltr" lang="EN-US"><span style="color:black">Deposit dollarization in Turkey has been on the rise, reaching record levels in 2022. This was caused by the worsening macroeconomic fundamentals along with the transition to the presidential system in 2018 and the associated deviation from the monetary policy stance afterward. The unique case of Turkey presents an excellent natural experiment to explore the dynamics of deposit dollarization and how it is affected by the changes in the institutional structure as well as various social, economic, and financial shocks in a relatively short time. This study examines the time varying reactions of deposit dollarization for the period between 2013 and 2022 based on rolling window maximum entropy bootstrap estimates. Our findings reveal that all the model variables had significant and sometimes asymmetric effects on deposit dollarization during the different stages of this turbulent period. In particular, we observe diminishing effects of real exchange rate, policy credibility and consumer confidence over time. The findings provide ample new evidence regarding the dynamics of deposit dollarization in general, and how it is affected by loss of monetary policy credibility.</span></span></span></span></p>

Australia’s Approach to Chinese Power and Managing Relations with Beijing: The Enduring Paradigm of Liberalism

ABSTRACT As China’s economy has grown, its military capabilities have expanded commensurately, and Beijing has adopted a more assertive foreign policy stance. Perceiving its primacy to be under threat, the response in Washington has been a hard turn towards a Realist paradigm evident across both the military and economic domains. The first contribution of this article is to document that, despite Australia being a staunch US security ally and having its own anxieties about Chinese power, Canberra has undertaken a more modest Realist tilt. This tilt has focused heavily on the military domain, whereas more broadly, an approach informed by the paradigm of Liberalism endures. The second contribution is to theorise this attachment to Liberalism by drawing on Australia’s recent experience of being targeted by Chinese power in the form of geoeconomic coercion. Australia’s interests were not protected by the power of Canberra’s geopolitical friends. Instead, economic interdependencies constrained Beijing’s options, and risks were mitigated by Australian exporters having access to a global trading system underpinned by rules and institutions. Rather than being rooted in ideological and normative appeal, Canberra’s ongoing attachment to Liberalism mostly reflects utilitarian considerations. Australia’s experience likely offers lessons for other lesser powers.

ECB communication sentiments: How do they relate to the economic environment and financial markets?

In this paper we examine multiple dimensions of ECB monetary policy communication by identifying its sentiment and relation with the economic environment and financial markets. We quantify communication sentiment using transcripts from official ECB communication events – press conferences, accounts and Executive Board speeches – as well as media reactions that highlight the key messages of those events. Importantly, we create distinctive lexicons for both of those communication types. We find that the overall trends in the sentiment indices for the analysed communication events closely resemble the movements of monetary policy stance as well as inflation dynamics in the euro area, both before and after the COVID-19 shock period. The communication tone generally shifts in advance of actual monetary policy actions. Using regression analysis, we find some expected, statistically significant effects of press conference sentiment on bank stock prices (information-type shock) and identify the impact of Executive Board speeches on euro area risk-free rates. Fragmentation issues among euro area member states do not seem to be negatively affected by the sentiments of the ECB’s communication. Still, policy makers should be aware that the tone of their communication events is likely to affect particular financial markets. These results are confirmed by various robustness checks.

The effects of monetary policy across fiscal regimes

How do the effects of monetary policy depend on the fiscal policy stance? We aim to answer this question using a panel smooth transition local projection model for the euro area. We find that an expansionary monetary policy shock raises inflation and output, but only when fiscal policy is also expansionary. In a regime of contractionary fiscal policy, the responses to a monetary easing are insignificant or negative. Similarly, a monetary tightening only reduces inflation and output when accompanied by contractionary fiscal policy. These results are robust to several alternative model specifications and underline the importance of the fiscal stance for the effects of monetary policy.

Directive 2023/1791 EED: A Step Closer to Mandatory Green Public Procurement Criteria Through Sectorial Legislation

The European Union’s Directive 2023/1791 EED is a critical step in the European Union’s trajectory towards climate neutrality by 2050, instituting enforceable Green Public Procurement criteria. This article delves into the Directive’s implementation complexities, scrutinising its potential to navigate the EU energy policy evolution and foster sustainability in public procurement. Notably, Article 7 and Annex IV of the Directive demonstrate a clear shift by mandating high energy efficiency performance standards across various sectors, signifying a move from discretionary to compulsory Green Public Procurement criteria. Despite its robust policy stance, the Directive faces practical impediments, including diverse Member States compliance levels and the need to balance regulatory directives with market dynamics. While the Directive aims to position public authorities at the forefront of sustainable procurement, catalysing market transformation, it walks a delicate line between legislative ambition and actionable enforcement. The variability in economic and technological capacities among Member States could hinder uniform application. By introducing a framework that allows for enforceable, adaptive, and technology-sensitive specifications, the Directive could bridge the gap between policy and practice, optimising its impact on energy consumption and environmental sustainability. However, addressing potential ambiguities in interpretation, the economic burden on public entities, and institutional inertia remains critical for its rigorous and effective implementation. This article provides a comprehensive analysis of Directive 2023/1791, situating it within the EU’s broader energy policy framework, and critically evaluates its potential to truly change the Union’s approach to energy efficiency and Green Public Procurement.

The effect of fragmentation risk on monetary conditions in the euro area

This paper measures the output effects of financial fragmentation in the euro area by estimating an extended IS curve. Using a panel approach, we find that two fragmentation measures are significantly related to the output gap: sovereign spreads and spreads in the long-term cost of borrowing of the private sector. We use these output effects to construct a Monetary Conditions Index (MCI) for euro area countries. This index summarizes the combined effect of the monetary policy stance and financial fragmentation. We show that the MCI approach is well-suited to capture cross-country differences in a fragmentation-enhanced measure of the monetary policy stance. Using this metric, we find that during the sovereign debt crisis, the cross-country dispersion of MCI's based on sovereign spreads was much larger than that based on the private cost of borrowing. We also show that convergence is slower for MCI's based on sovereign spreads. We conclude that the causes of fragmentation in monetary conditions may change over time, and that this has implications for the appropriate policy response.

The non-linear impact of monetary policy on shifts in economic policy uncertainty: evidence from the United States of America

A stochastic volatility estimation of VIX index’s latent volatility is used for the United States of America, as a proxy for the adjustments in the levels of investors’ uncertainty related to current and future economic policies. The impact of monetary policy stance on such measure is examined in the framework of the distributed lag non-linear models (DLNM). We place this analysis in the literature stream emphasizing the various sources of heterogeneity concerning investors’ expectations. The main finding is that the monetary policy does impact non-linearly the adjustments in investors’ predictions. While a tighter monetary policy does generally contribute to an increase in VIX’s latent volatility, the shape of such effect varies across different GLM and GAM specifications of DLNM. This outcome remains robust, even if: (1) we control for the global price of Brent crude and consumers’ confidence; (2) we use, instead of the stochastic framework, a Markov-switching GARCH-based estimator; or (3) we replace the monetary policy instrument with monetary policy uncertainty. We argue that accounting for its nonlinear effects on financial markets is of critical importance for the design of a monetary policy pursuing global financial stability.

THAILAND’S HEDGING STRATEGY UNDER THE STRATEGIC COMPETITION BETWEEN CHINA AND THE UNITED STATES

Thailand's foreign policy stance has shifted dramatically since the Prayuth regime staged a coup in 2014. The purpose of this study: 1) Complement and expand on the theoretical meaning of hedging strategy. 2) It can theoretically support Thailand in the face of strategic conflict between China and the United States. 3) Be aware of why Thailand implements a hedging strategy and know the specific performance of Thailand’s hedging strategy. 4) It will aid in the growth of Thailand's connections with the two big countries. 5) This article can provide certain reference for research related to Thailand’s diplomatic strategy. The method of this study adopts content documentary analysis, case analysis method, literature research and historical method. According to the findings of this study, Thailand has begun to tilt more toward requesting assistance from China in Prayuth goverment. Many researchers are concerned about Thailand's neutrality. However, Thailand has not yet vanished from the United States. Just a few steps removed from the Obama and Trump administrations. Thailand has begun to rebuild its old friendship with America as the Joe Biden era looms. But anyway Thailand cannot choose a side. Because Thailand is a reliable ally on both sides. This has caused the Prayut government to seek cooperation from other organizations and countries, including Japan, India, and ASEAN. Thailand has accelerated the development of economic links with Japan. Accelerate the political development of relations with India. and establishing ties with ASEAN and Southeastern countries in order to find a way for small countries to maintain their own interests as much as possible in the fight between the two superpowers. Although hedging techniques are currently the preferred option for smaller countries, the variables driving this strategy differ. In Thailand, the majority of the factors that influence hedging tactics originate within the country. But all bordering countries are influenced by foreign causes. As a result, Thailand has become another special case of hedging among ASEAN countries.

The Impact of Access to Intermediate Inputs on Export Margins: Firm-Level Evidence from the Regression Decomposition Approach

This paper analyzes how export margins responded to an intermediate input supply shock caused by the 2020 lockdown in China. We use regression decomposition with triple and quadruple difference-in-differences models to identify causal impacts and mitigate potential heterogeneity in transaction-level customs data from the Bangladesh apparel manufacturing industry. The triple difference estimate shows that the average export value per firm–product–destination combination declined by approximately 65%, leading to a decrease in overall exports of woven apparel from Bangladesh. The input supply shock also adversely affected the subgroups of firms across various firm-level characteristics along the intensive margin. Moreover, the export market share decomposition reveals that the shock significantly affected intensive margins by decreasing incumbents’ market allocation by 9%. An equivalent increase in extensive margins led to a readjustment in the market allocation, leading to fewer market leavers and slightly more new market entrants. Our results indicate that Bangladesh’s exports mostly decreased due to the smaller quantities of products exported rather than there being fewer firms, destinations, or products involved in export trade. There were significant market share reallocations that occurred after the Chinese input supply shock. An appropriate policy stance is required for sustainable export sector growth strategies, which will enhance the country’s defense against potential future shocks and foster the achievement of sustainable development goals (SDGs) in Bangladesh.

INDONESIA’S RESPONSES TOWARDS ROHINGYA REFUGEES: POLITICAL PERSPECTIVE

Rohingya refugees, originating from Myanmar, face significant challenges in Southeast Asia due to official non-recognition and systemic discrimination. Many seek refuge in neighboring countries like Indonesia. Employing qualitative research methods and an extensive literature review, this study investigates Indonesia’s responses to the Rohingya crisis from a political perspective. Additionally, building upon conflict resolution theory, it emphasizes the importance of dialogue, mediation, and compromise in addressing intricate crises. Furthermore, it explores concepts such as humanitarian diplomacy and regionalism, elucidating Indonesia’s role within ASEAN-led mechanisms. The research reveals key findings, showing Indonesia’s active participation in diplomatic initiatives addressing the Rohingya crisis, both bilaterally and within multilateral forums. Indonesia’s policy stances reflect a commitment to humanitarian principles and regional stability, emphasizing the protection of Rohingya rights. As a prominent member of ASEAN, Indonesia has leveraged regional platforms to advocate for collective action and effectively address the Rohingya crisis. This research sheds light on Indonesia’s role in addressing one of Southeast Asia’s most pressing humanitarian challenges, underscoring the importance of regional cooperation in finding sustainable solutions.

Mobilizing middlemen: the Conservative Political Action Conference and the creation of party activists

ABSTRACT How are activists molded into middlemen in a polarized two-party system? Using the case of the Conservative Political Action Conference (CPAC), this paper examines the process of activist mobilization that occurs at political gatherings. Using two rounds of interviews and participant observation from CPAC in 2019 and 2020, I argue that contrary to popular media portrayals of CPAC as political theater now rooted in the spectacle of President Trump, the conference is an important site of mobilizing activists into party middlemen. This happens through three processes: first conference attendees are taught conservative policy stances and presented with a bundle of issue positions; second, they are provided with the tools for effective activism formally through provided training and informally through socialization; and finally, their conservative identity is continually defined and reinforced with cultural meaning-making practices throughout the conference.

Trump Says the WTO Is a Disaster

In 2017, it was a challenge to assess the future of global trade. It was an open question whether the US financial crisis and the recession that it triggered would mark a turning point for the liberal post–World War II world order. If one looked toward Europe, China, Latin America, and Japan, there was a flurry of activity. New trade agreements were being completed and pursued. In Washington, DC, on the other hand, President Donald Trump seemed set on ripping apart and/or renegotiating any trade deal the United States was ever part of.This case explores Trump's opinions and emerging policy stance on trade, bilateralism, and the global economy, among others. It also gives an overview of the World Trade Organization (WTO) and the General Agreement on Tariffs and Trade (GATT) and asks whether the Trump presidency would constitute a major challenge to the WTO and what it stood for in 2017.

A rationale for the Right-to-Development climate policy stance?

We present a formal model that analyzes the trade-offs between environmental policy and economic growth in a developing economy. The adoption of restrictive environmental policies limits the use of abundant fossil energy resources, which may slow down economic development and thus violate the Right-to-Development. If faster economic growth allows a country to grow out of pollution sooner, less stringent policies are good for growth and even for the environment, having adopted a long-term horizon. Accounting for a ceiling on cumulative emissions can reinforce the argument by providing an additional rationale to phase out pollution. One assumption is crucial for the argument to hold: polluting fossil energy is an essential input over the early phase of economic development, but not in the later phases. Such a discontinuity could result from structural change. We provide empirical evidence for the plausibility of a discontinuity in the elasticity of carbon dioxide emissions with respect to aggregate output, using cross country data, even if it does not appear to be as strong as assumed in the model economy.

Beyond populism and into the state: The political economy of national-conservatism

This article argues that the crises of neoliberal globalisation since the 2000s have given rise to a new transnational political family that we call ‘national-conservatism’. Through a critical examination of the literature on the Global Right and the role of the state under globalisation, we contend that national-conservatism acts as an innovative model for acquiring and exerting power from the right today, characterised by an endorsement of the state’s economic role, an emphasis on traditional values and hierarchies such as religion, and a proactive, occasionally confrontational stance in foreign policy. Consequently, the paradigm of national-conservatism prompts the division of transnational neoliberalism into discrete national domains. These domains function as havens where the neoliberal elite is shielded both from foreign competitive pressures and radical demands of respective national societies. Crucially, national-conservatism garners legitimacy for this new order through its commitment to revitalising traditional, hierarchical models of national sovereignty.