Unexpected Policy Research Articles

Current status of the Food Security system in Mongolia new policies, and expected outcomes

The national food security system in our country is not established well and continues to remain weak. Failures within the system have caused malfunctions and distortions in government policy implementation, leading to unexpected policy shifts. These faults are the main causes of time loss, inter-agency misunderstandings, lack of coordination, information flow deficiencies, and a shortage of skilled human resources. These issues can have a negative impact on food security in Mongolia, resulting in the shortfall of government policy implementation. Coordination of food security activities among government organizations in Mongolia has been unsatisfactory due to the weak system. Government services have not adequately reached organizations at the middle and primary levels in the Mongolian rural provinces. This research paper aims to evaluate the national food security situation based on policies in Mongolia's food sector over the past decade, their implementation, encountered problems, and involved stakeholders. The research findings show that our country's food security system is not well-established, leading to compromised food security, highlighting the urgent need for developing necessary legal and policy documents to effectively implement state food security policy.

Shaping inequality and intergenerational persistence of poverty: Free college or better schools?

We evaluate the aggregate, distributional and welfare consequences of alternative government education policies to encourage college completion, such as making college free and improving funding for public schooling. To do so, we construct a general equilibrium overlapping generations model with intergenerational linkages, a higher education choice as well as a multi-stage human capital production process during childhood and adolescence with parental and government schooling investments. The model features rich cross-sectional heterogeneity, distinguishes between single and married parents, and is disciplined by US household survey data on income, wealth, education and time use. Studying the transitions induced by unexpected policy reforms we show that the “free college” and the “better schools” reform generate significant welfare gains, which take time to materialize and are lower in general than in partial equilibrium. It is optimal to combine both reforms: tuition subsidies make college affordable even for children from poorer parental backgrounds and better schools increase human capital thereby reducing dropout risk.

Evaluation of Accountability in The Performance Report of The Batam Free Trade and Free Port Authority (bp Batam)

This research aims to analyze and evaluate the evaluation process of the Performance Accountability Report of the Batam Free Trade and Free Port Authority (BP Batam) based on results in 2022. This study focuses on evaluating the performance of BP Batam using qualitative research methods. Data collection is carried out through secondary data from planning documents and financial and performance reports of government agencies. Data analysis is conducted using techniques such as thematic analysis, grounded theory, or narrative analysis. The results of this research indicate that there are challenges in the performance planning of the BP Batam Government, such as inconsistencies between performance planning in documents such as RPJMD, RENSTRA SKPD, RKT, TAPKIN, and LAKIP, which are caused by a lack of coordination among various stakeholders and unexpected policy changes. The performance measurement process of BP Batam has not been optimally utilized for control and monitoring. BP Batam needs to establish good internal coordination among its units, implement an effective monitoring and evaluation system, and optimize its human resources to overcome challenges in the preparation of LAKIP. BP Batam can use the combination of the Performance Blueprint and Friedman's Four Quadrant Approach for measuring and managing organizational performance more effectively.

How does corporate investment respond to trade policy uncertainty in China? The role of political connections

This paper investigates how political connections affect the relationship between trade policy uncertainty and corporate investment by utilizing Chinese non-financial firm-level data from 2003 to 2022. We find that trade policy uncertainty inhibits corporate investment by decreasing expected cash flows, increasing cash flow uncertainty, and lowering investment returns. Political connections mitigate the adverse impact of trade policy uncertainty on corporate investment by increasing government subsidies, alleviating financing constraints, and improving investment inefficiency for firms. The results are robust to changing variables measurements, alternating econometric model settings, and addressing endogeneity concerns. We also find the adverse impact of trade policy uncertainty on corporate investment is more pronounced for non-state-owned firms and small-sized firms, and the positive role of political connections benefits firms with higher financing constraints, lacking bank-firm relationships, and regions with lower institutional quality. Our findings highlight that optimizing the business environment and strengthening the communication between firms and governments are crucial for coping with unexpected policy uncertainty shocks.

Labor market forecasting in unprecedented times: A machine learning approach

AbstractThe COVID‐19 pandemic ushered in unprecedented social and economic conditions, alongside unexpected policy responses, challenging the effectiveness of traditional labor market forecasting approaches. This article presents a novel approach that integrates macroeconomic variables, traditional labor market metrics, and Google search data to develop a machine learning‐based indicator for the Colombian labor market. We employ support vector machine for regression and neural networks models to forecast monthly employment and unemployment rates, explicitly focusing on the third wave of COVID‐19 in the first half of 2021. Our study's findings reveal that the proposed models outperform the autoregressive benchmark regarding forecast accuracy, demonstrating a rapid adaptation to labor market shifts.

Identifying causal mechanisms of unexpected policy change: Accumulated punctuation in the field of lobbying transparency in Germany

AbstractRecent trends toward mechanistic approaches offer a new perspective in understanding policy change and stability. This paper analyzes causal mechanisms leading to unexpected policy change by using punctuated equilibrium theory. As empirical illustration, the paper presents a case study on the introduction of the German mandatory lobbying register in 2021 after a 16‐year‐long debate. Methodologically, the paper employs process tracing and qualitative content analysis to examine policy documents. We identify a combination of three mechanisms: end of a de‐thematization of the policy issue, growing dominance of the issue network favoring stricter transparency regulations, and issue validation through the accumulation of scandals. Thus, policy change results from the descend of policy actors defending the status quo while those advocating for change ascend to an influential position, and actively exploit focusing events as fertile ground for reform. The paper contributes to a refined theoretical understanding of the causal mechanisms of policy change.

Persuadable voters decided the 2022 midterm: Abortion rights and issues-based frameworks for studying election outcomes.

Leading up to the 2022 Congressional midterm elections, all predictions pointed to a Republican wave, given factors such as the incumbent president's low approval rate and a struggling national economy. Accordingly, the underwhelming performance of the Republican Party surprised many, resulting in an election that became known as the "asterisk election" due to its unusual and seemingly unpredictable outcome. This study delves into the specifics of the 2022 midterms, exploring factors that may have influenced the results beyond those traditionally considered by political scientists. Our analysis particularly seeks to understand whether a sudden shift in the public salience of specific issues could have influenced voters' preferences, leading them to consider factors they might not have otherwise. To achieve this, we analyzed data from a nationally representative sample of registered voters surveyed immediately after the midterm elections. Our findings reveal that the issue of abortion played a pivotal role during this election. The prominence of abortion was not predestined, as evidenced by a comparative analysis with data from a survey conducted after the 2020 presidential election. Indeed, it seems that the decision by the Supreme Court to overturn Roe v. Wade in June 2022 significantly increased the salience of abortion. This unexpected policy shock had a significant impact on the behavior of voters in the 2022 midterm elections.

Does Trade Liberalization Foster Intimate Partner Violence?

By exploiting an unexpected policy change in the form of drastic tariffs reduction across several industries in Peru during the 2000s we are able to causally show that in districts where industries’ employment are predominantly male, trade liberalization produced an increase in physical intimate partner violence of 36 percentage points with respect to control districts in our preferred specification. We find no such difference in districts where industries’ employment is predominantly female. These findings are original and consistent with several hypotheses in the social sciences. Our results are robust to falsification and placebo tests, sensitivity to initial conditions, conflation of past and current shocks, selective migration, permutation tests and input-tariffs considerations. Finally, we find considerable heterogeneity, as education and the age of first marriage appear to be key variables that correlate with our findings.

Wishful Thinking or Valuable Forecasts? The Value of Policy Rate Predictions in Sweden

Economists often provide predictions about future interest or policy rates. In contrast to stock market predictions, these forecasts are typically regarded seriously and presented with a degree of accuracy. This paper explores whether placing more confidence in policy rate predictions than stock market predictions is reasonable. It begins by examining historical policy rates predictions in Sweden, comparing them to actual rates to assess their accuracy. The paper then delves into the discussion of how costs of mispredictions, such as sudden and unexpected policy rate increases, can and should be addressed. Despite the Central Bank making predictions within confidence intervals and the banking sector regulating individuals’ borrowing, the burden of unpredicted rate increases falls almost entirely on individuals. The paper addresses whether that is reasonable.

Policy conflict between political elites shapes mass environmental beliefs

A substantial literature in political science suggests that individuals’ policy preferences can be shaped by the actions of elite actors and the policies they emphasize and implement. Yet can these actions and interactions have second order effects and actually affect individuals’ beliefs about the causes of the problems that policy seeks to address in the first place? This research note identifies the effect of policy conflict upon individuals’ beliefs about the societal problems, using original survey data from New Delhi. This effect is estimated by comparing beliefs about the causes of air pollution just before and after an unexpected policy conflict between the government and a judicial body over policy to limit vehicle usage. The results find that the policy conflict caused mass beliefs about the causes of pollution to change. In line with the theory of inferred justification, belief updating led individuals who generally approve (disapprove) of the government to believe vehicle usage was more (less) responsible for air pollution respectively. This is in spite of the fact that the spike in air pollution was caused by agricultural burning. The results suggest that policy conflict between political elites can not only affect mass policy preferences, but also alter beliefs about the cause of such societal problems policy seeks to address.

Opportunities and challenges in applying reinforcement learning to robotic manipulation: An industrial case study

As manufacturing moves towards a more agile paradigm, industrial robots are expected to perform more complex tasks in less structured environments, complicating the use of traditional automation techniques and leading to growing interest in data-driven methods, like reinforcement learning (RL). In this work, we explore the process of applying RL to enable automation of a challenging industrial manipulation task. We focus on wire harness installation as a motivating example, which presents challenges for traditional automation due to the nonlinear dynamics of the deformable harness. A physical system was developed involving a three-terminal harness manipulated by a 6-DOF UR5 robot, with control enabled through a ROS interface. Modifications were made to the harness to enable simplified grasping and marker-based visual tracking. We detail the development of an RL formulation of the problem, subject to practical constraints on control and sensing motivated by the physical system. We develop a simulator and a basic scripted policy with which to safely generate a data-set of high-quality behaviors, then apply a state-of-the-art model-free offline RL algorithm, TD3 + BC, to learn a policy to serve as a safe starting point on the physical system. Despite extensive tuning, we find that the algorithm fails to achieve acceptable performance. We propose three failure modalities to explain the learning performance, related to control frequency, task symmetry arising from problem simplifications, and unexpected policy complexity, and discuss opportunities for future applications.

Labor Market Discrimination against Family Responsibilities: A Correspondence Study with Policy Change in China

China shifted its controversial one-child policy (1979–2015) to a two-child policy in 2016. We take advantage of this unexpected policy change and the heterogeneities in the prechange environment to investigate labor market discrimination against expected family responsibilities. In a two-wave correspondence study before and after the policy change, we sent 8,848 fictitious resumes with ages 22–29 in response to online job advertisements. Their gender and only-child/siblinged status were systematically varied. We find that women—but not men—are subject to labor market discrimination for expected family responsibilities. This discrimination worsens with the increase in women’s reproductive age.

A Balkan Neofunctional Success Story or the Curious Case of Bosnia’s Central Bank

Bosnians show little faith in their state-level institutions, and with good reason, as the country ranks poorly on measures of corruption, regulatory quality, and government efficacy. However, the Central Bank of Bosnia and Herzegovina (CBBH) is a notable exception. In a country where the state is still often paralyzed by ethnically aligned obstructionism, the Central Bank is widely lauded as an effective state-level institution, and it backstops, and oversees, a stable, trusted, pan-Bosnian banking system. To explain the Bank’s success, we draw on rational choice and institutionalist literature to propose and test a theory of the “CBBH as referee” in its three main functional areas: currency board maintenance, payment system operation, and the coordination of banking supervision. We find evidence for this mechanism in the context of currency board operations, and we also document a Haas-ian neofunctional process, in which the Bank has interacted cyclically with foreign banks to unintentionally de-ethnicize the Bosnian financial sector. Initial Bank reforms facilitated foreign banks’ market entry, and their subsequent lack of interest in hewing to prior ethnic divisions served to cement a unified Bosnian financial space. We substantiate this argument with data drawn from interactive interviews with Bosnian policymakers, financial sector experts, and banking sector participants, and in so doing, also show how the commercial behavior of transnational actors can have unexpected policy impacts.

Unconventional Monetary Policy: Diversity of Measures and Information Effects

The paper presents an analysis of the consequences of the European Central Bank’s (ECB) unconventional monetary policy measures from 2007 to 2019. Econometric estimates of the effectiveness of the ECB’s policy can be biased for two reasons: first, the entire range of adopted measures may not be considered, and second, unexpected policy actions can prompt economic agents to revise their expectations and perceptions of the ECB’s monetary policy rule. Such an information shock might be mistakenly interpreted as a monetary shock. The approach proposed in the paper combines factor analysis and sign restrictions on high-frequency data in a Bayesian Vector Autoregression (BVAR) model. This approach yields findings that align with macroeconomic theory and offers a more comprehensive insight into the effects of different unconventional monetary policy measures on both financial and real variables. The identification of a monetary shock is carried out in parallel with the identification of an information shock. Unconventional monetary policy measures are approximated using high-frequency factors that influence specific segments of the yield curve. Unconventional ECB measures prove effective in stimulating business activity and price growth as well as in contributing to reduced financial stress. However, there is heterogeneity in their effects. The announcement of quantitative easing exhibits a small external lag with respect to the policy and leads to increased stock prices and lending volumes, indicating the effectiveness of the portfolio rebalancing and credit channels. For measures related to the shorter end of the yield curve, the external lag of the policy can extend up to a year. These measures strongly impact price growth due potentially to effective management of economic agents’ expectations. The consequences of information shocks are moderate and manifest prominently only in the initial months. This limits their ability to offset the effects of monetary policy and does not hinder the ECB’s goal of achieving inflation targets

Liquidity Requirements, Bank Deposits and Financial Development

In the presence of low trust in the banking system, liquidity requirements can stimulate bank deposits and financial development by enhancing depositor repayment in bad states. We study an unannounced and unexpected policy that increased the liquid assets of Ethiopian banks by 33% in one quarter of 2011, and present three findings consistent with this hypothesis. First, a panel of depositors shows deposit growth among wealthy individuals. Second, a survey reports higher bank deposits in branches opened after the policy in high‐income cities. Third, bank balance sheets and two sources of bank exposure highlight an increase in deposits, loans and branches.

Liquidity shocks and pension fund performance: Evidence from early access

We study how expectations of fund flows causally affect fund performance by exploiting a quasi-natural experiment in the Australian pension system where an unexpected policy change temporarily allowed fund withdrawals from a prespecified date in the future. Using fractions of young members, middle-aged members, and government co-contributions for low-income earners as instrumental variables, we find an insignificant effect of expected fund outflows on performance. A potential explanation is that Australian superannuation funds preemptively engage in liquidity management in response to changes in expectations of future fund flows and this helps to limit direct and indirect costs in the rebalancing process. JEL Classification: G11, G12, G14, G23, G51

What lies beneath—Negative interest rates and bank lending

We study the transmission of negative interest rates to bank lending around an unexpected policy rate cut into deep negative territory by the Swiss National Bank (−0.75%). We exploit a rich data set on transaction-level corporate loans matched with bank balance sheet data. We find that banks more affected by negative interest rates offer looser lending terms and lend more than other banks. This result is consistent with the risk-taking channel, where a lower policy rate spurs bank risk-taking to maintain profits. The result implies that, even in such deep negative territory, the reversal rate has not yet been hit.

An Unintended Consequence of Unexpected Policy: A Left-wing Social Policy by a Right-wing Political Party and Voters’ Policy Evaluation in South Korea

ABSTRACT Using an original survey experiment in South Korea, we find that the introduction of a progressive welfare policy by a right-wing political party makes people more favorable in their perceptions of legitimacy, credibility, and agreement on the policy. We also find that such a support-increasing effect is stronger among people who feel attached to the right-wing party. The results imply that partisan cues are extended to cases where political parties implement policies that do not correspond to their long-established ideology.

Politicalized empowered learning and complex policy implementation: Targeted poverty alleviation in China's county governments

AbstractThe implementation of complex policies is of critical significance for the achievement of many central governments' policy expectations. How do local governments implement complex policies? By using a structured‐learning framework constructed from the governance‐localization perspective, we evaluated the mode three Chinese counties employed to implement the targeted poverty alleviation (TPA) policy. We found poverty alleviation task teams were the core TPA practitioners, and the implementation mode was politicalized empowered learning. Local governments reconstructed their implementation structures through the establishment of politicised project organisations. By involving and braiding multiple policy actors, vertical and horizontal conflicts were resolved, and collective action structures were constructed. They also constructed governance mechanisms for policy learning. Top‐down policy knowledge was translated and shared; bottom‐up local knowledge was produced; and, policy knowledge and local knowledge were integrated. The relationships between implementation structures, policy learning, and political steering led to diverse and unexpected policy implementation outcomes.

Deciphering Federal Reserve Communication via Text Analysis of Alternative FOMC Statements

We apply a natural language processing algorithm to FOMC statements to construct a new measure of monetary policy stance, including the tone and novelty of a policy statement. We exploit cross-sectional variations across alternative FOMC statements to identify the tone (for example, dovish or hawkish), and contrast the current and previous FOMC statements released after Committee meetings to identify the novelty of the announcement. We then use high-frequency bond prices to compute the surprise component of the monetary policy stance. Our text-based estimates of monetary policy surprises are not sensitive to the choice of bond maturities used in estimation, are highly correlated with forward guidance shocks in the literature, and are associated with lower stock returns after unexpected policy tightening. The key advantage of our approach is that we are able to conduct a counterfactual policy evaluation by replacing the released statement with an alternative statement, allowing us to perform a more detailed investigation at the sentence and paragraph level.