Browsing by Subject "politiikka"

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  • François, Abel; Panel, Sophie; Weill, Laurent (2019)
    BOFIT Discussion Papers 12/2019
    Since political uncertainty is greater in dictatorships than in democracies, we test the hypothesis that foreign investors scrutinize public information on dictators to assess this risk. In particular, we as-sume they use five suitable dictators’ characteristics: age, political experience, education level, ed-ucation in economics, and prior experience in business. We perform fixed effects estimations on an unbalanced panel of 100 dictatorial countries from 1973 to 2008 to explain foreign direct investment (FDI) inflows. We find that educated dictators are more attractive to foreign investors. We obtain strong evidence that greater educational attainment of the leader is associated with higher FDI. We also find evidence that the leader having received education in economics and prior experience in business is associated with greater FDI. By contrast, the leader’s age, and political experience have no relationship with FDI. Our results are robust to several tests and checks, including a comparison with democracies.
  • Francis, Bill B.; Hasan, Iftekhar; Sun, Xian; Wu, Qiang (2016)
    Bank of Finland Research Discussion Papers 5/2016
    Published in in Journal of Corporate Finance 2016 ; 38 ; june ;
    ​We show that firms led by politically partisan CEOs are associated with a higher level of corporate tax sheltering than firms led by nonpartisan CEOs. Specifically, Republican CEOs are associated with more corporate tax sheltering even when their wealth is not tied with that of shareholders and when corporate governance is weak, suggesting that their tax sheltering decisions could be driven by idiosyncratic factors such as their political ideology. We also show that Democratic CEOs are associated with more corporate tax sheltering only when their stock-based incentives are high, suggesting that their tax sheltering decisions are more likely to be driven by economic incentives. In sum, our results support the political connection hypothesis in general but highlight that the specific factors driving partisan CEOs’ tax sheltering behaviors differ. Our results imply that it may cost firms more to motivate Democratic CEOs to engage in more tax sheltering activities because such decisions go against their political beliefs regarding tax policies.
  • Yakovlev, Andrei; Freinkman, Lev; Ershova, Nina (2018)
    BOFIT Policy Brief 5/2018
    We explore the role and organizing capacity of foreign business associations (FBAs) in the Russian context. Considering the potential role of FBAs as effective intermediaries during time of aggravated international relations, the paper examines the problems and mechanisms of foreign firms’ interaction with key national partners in their host countries and describes the conditions that lead to effective dialogue between FBAs and national governments. The main phases and factors of evolution are identified for Russia’s two main channels of foreign firms’ collective actions: The Foreign Investment Advisory Council, which is chaired by Russia’s prime minister, and FBAs. A comparative analysis of the efficiencies of each channel finds that political, rather than economic or institutional, factors play the dominant role in explaining the shifting efficiency of collective action of foreign firms over time.
  • Goel, Rajeev K.; Korhonen, Iikka (2009)
    BOFIT Discussion Papers 5/2009
    Published in Economic Systems 35 (2011) 109-124 as "Exports and Cross-National Corruption: A Disaggregated Examination"
    This research examines the connection between a country's export structure and corruption, incorporating disaggregated data on exports for a recent time period over a large set of nations. We ask whether various types of exports (e.g. agricultural, mineral, manufacturing and fuel) exert similar influences on corruption across nations. Our results suggest that corruption decreases as nations attain prosperity, as economic and political freedoms increase, and with a larger government size. Ceteris paribus, transition countries are also found to be more corrupt. Ethnic and linguistic fractionalizations exert opposite influences on corruption, while religious fractionalization does not seem to matter. Although the effects of ore and manufacturing exports are statistically insignificant, agricultural and fuel exports affect corruption significantly. Our findings for fuel exports support previous research, as well as uniquely demonstrate that the impact of fuel exports is sensitive to the prevailing corruption level. We conclude with a discussion of policy implications. Keywords: corruption, exports, resource curse, government JEL codes: H11, K42, O13
  • Gu, Xian; Hasan, Iftekhar; Lu, Haitian (2019)
    Comparative Economic Studies 3 ; September
    Using a comprehensive dataset of corporate lawsuits in China, we investigate the implications of corporate misconduct on the cost of private debt. Evidence reveals that firms involved in litigations obtain subsequent loans with stricter pricing terms, 15.1 percent higher loan spreads, than non-litigated borrowers. Strong political connection and repeated relationship help to flatten the sensitivity of loan pricing to litigation. Nonbank financial institutions react in stronger manner to corporate misconduct than traditional banks in pricing loans. Overall, we show that private debt holders care about borrowers’ wrongdoing in the past.
  • Sutela, Pekka (2005)
    BOFIT Online 6/2005
    Establishing connections between economic performance and policies, institutions and exogenous change is difficult under any circumstances.In the case of Russia, where relevant time series are short and structural and institutional change has occurred in the absence of a well-defined model of the economy, it becomes largely - if not entirely - a matter of art and taste.This paper considers the possible impacts of structural reform under President Putin on Russian economic performance.Judging the impact of Putin's reforms on recent Russian economic performance is confounded by the problem of overdetermination.That is, we can identify a number of contributing factors, but cannot say for sure if their absence would have a crucial effect on outcomes.On the other hand, there seem to be no grounds for denying the importance of reforms, even if their short-term impact might primarily be through expectations, a factor notoriously difficult to pinpoint. Further, it is a matter of some delight that, contrary to what is currently all too easily and often argued, Russia's structural reforms continue.Key words: Russia, economic policy, reforms, growth
  • Frye, Timothy; Borisova, Ekaterina (2016)
    BOFIT Discussion Papers 9/2016
    Published online in the Journal of Politics
    How do flawed elections and post-election protest shape political attitudes? Taking advantage of the largely exogenous variation in the timing of a survey conducted in Moscow, we examine the short-term impact of the parliamentary election of December 4th, and the large protest of December 10th on trust in the Russian government. The fraud-marred parliamentary election had little effect on attitudes toward government, perhaps because allegations of vote improprieties were not new information. In contrast, the large protest of December 10th increased trust in government. Heightened trust arises largely from non-supporters of the ruling party updating their beliefs rather than from social desirability bias, a perceived improvement in government performance, or a “halo” effect. This finding is consistent with the view that autocrats can increase trust in government by unexpectedly allowing protest without repression. It also suggests that when evaluating trust in government citizens may cue not off the content of the protest, but off the holding of the protest itself.
  • Li, Weijia; Roland, Gérard; Xie, Yang (2020)
    BOFIT Discussion Papers 5/2020
    How do corruption and the state apparatus interact, and how are they connected to the political and economic dimensions of state capacity? Motivated by historians' analysis of powerful empires, we build a model that emphasizes the corrosive effect of corruption on state power. Under general assumptions about fat-tailed risk, we show that, if fiscal capacity is strong, then the optimal response for the head of the state apparatus will be an endogenous lexicographic rule whereby local corruption is maintained at such a level that no erosion of state power is tolerated. Comparative statics shows the impacts of additional risk of crisis on corruption tolerance as well as the complementarity between personalistic rule and corruption. Implications of corruption at the head of the state apparatus are also analyzed. If fiscal capacity is not sufficiently strong, however, the state will have to over-tolerate corruption to retain its affiliates, risking its control in crises. Our model predicts that the correlation between state's political stability and corruption is non-monotonic across different levels of fiscal capacity, and this prediction is robustly consistent with recent cross-country panel-data.
  • Saka, Orkun; Ji, Yuemei; De Grauwe, Paul (2021)
    BOFIT Discussion Papers 10/2021
    We first present a simple model of post-crisis policymaking driven by both public and private interests. Using a novel dataset covering 94 countries between 1973 and 2015, we then establish that financial crises can lead to government interventions in financial markets. Consistent with a public interest channel, we find post-crisis interventions occur only in democratic countries. However, by using a plausibly exogenous setting -i.e., term limits- muting political accountability, we show that democratic leaders who do not have re-election concerns are substantially more likely to intervene in financial markets after crises, in ways that may promote (obstruct) private (public) interests.
  • Rantakari, K. N. (1937)
    Bank of Finland. Monthly Bulletin 17 ; 2 ; February
  • Marques II, Israel (2018)
    BOFIT Discussion Papers 7/2018
    When does business support the expansion of social policy in the developing world? Existing work on managers’ preferences has tended to concentrate on the developed world, where governments can credibly commit to policy, tax evasion is constrained, and mechanisms exist to hold the bureaucracy accountable for policy implementation. In this paper, I relax these assumptions, arguing that weak institutions create opportunities for some firms to shift costs onto others: making social policy more attractive. I argue that firms with political connections are uniquely positioned to benefit from subsidies and property rights protection, which decreases the cost of social policy, while firms with low visibility can evade taxes and free-ride off universalistic social policy. Such firms will support social policy even where institutions are poor. I test this argument using a survey of 666 firms in 10 Russian regions.
  • Arola, Mika (2006)
    Suomen Pankki. E 37
    The main objective of the study is to evaluate the Finnish central government's foreign borrowing between the years 1862 and 1938. Most of this period was characterised by deep capital market integration that bears resemblance to the liberal world financial order at the turn of the millennium.The main aim is to analyse the credit risk associated with the state and its determination by evaluating the world financial market centres' perception of Finland.By doing this, the study is also expected to provide an additional dimension to Finland's political and economic history by incorporating into the research the assessments of international capital markets regarding Finland during a period that witnessed profound political and economic changes in Finnish society.The evaluation of the credit risk mainly relies on exchange-rate risk free time series of the state's foreign bonds.They have been collected from quotations in the stock exchanges in Helsinki, Hamburg, Paris and London.In addition, it investigates Finland's exposure to short-term debt and Moody's credit ratings assigned to Finland.The study emphasises the importance of the political risk. It suggests that the hey-day of the state's reliance on foreign capital markets took place during last few decades of the 19th century when Finland enjoyed a wide autonomy in the Russian Empire and prudently managed its economy, highlighted in Finland's adherence to the international gold standard.Political confrontations in Finland and, in particular, in Russia and the turbulence of the world financial system prevented the return of this beneficial position again.Through its issuance of foreign bonds the state was able to import substantial amounts of foreign capital, which was sorely needed to foster economic development in Finland.Moreover, the study argues that the state's presence in the western capital markets not only had economic benefits, but it also increased the international awareness of Finland's distinct and separate status in the Russian Empire and later underlined its position as an independent republic. Keywords: credit risk, government borrowing, financial market, government bonds, state finances JEL classification: E65, G15, H63, N13
  • Ambrocio, Gene; Hasan, Iftekhar (2019)
    Bank of Finland Research Discussion Papers 13/2019
    Do closer political ties with a global superpower improve sovereign borrowing conditions? We use data on voting at the United Nations General Assembly along with foreign aid flows to construct an index of political ties and find evidence that suggests closer political ties leads to both better sovereign credit ratings and lower yields on sovereign bonds. We use heads-of-state official visits and coalition forces troop contributions as exogenous instruments to further strengthen the findings.
  • Hao, Liang; Rong, Wang; Haikun, Zhu (2020)
    BOFIT Discussion Papers 20/2020
    Economic activities have always been organized around certain ideologies, yet little is known about how ideology shapes corporate behavior and how it is different from other political forces. We investigate the impact of politicians’ ideology on corporate policies by exploring a unique setting of ideological change in China from Mao’s ideology to Deng’s around 1978. Using textual analysis based on keywords in People’s Daily, we find a discontinuity in ideological exposure among people who later became city mayors. Those who were at least 18 years old in 1978 and had joined the Chinese Communist Party (CCP) are more likely to have adopted Mao’s ideology, and those who did not join by 1978, due to age limit, but joined soon thereafter were more likely to have adopted Deng’s ideology. This ideological difference has had an enduring effect on contemporary firm and city policies. Firms in cities governed by mayors with Mao’s ideology have made more social contributions, lowered within-firm pay inequality, and pursued less internationalization than those with Deng’s. These effects are stronger in firms with political connections, less state ownership, and more government subsidies as well as in regions that are more market-oriented and not “revolutionary bases.” Our results are robust to OLS regressions with various pair fixed effects besides regression discontinuity. We further find that corporate policies promoted by Mao’s ideology are associated with slower firm growth but greater stakeholder engagement.
  • Ru, Hong; Zou, Kunru (2020)
    BOFIT Discussion Papers 21/2020
    This paper investigates how politicians’ patronage connections affect privatizations in China. The connections to top political leaders (i.e., Central Committee of the Communist Party of China) make local politicians engage more in rent-seeking by selling state-owned enterprises (SOEs) at substantial discounts. These connected local politicians are also more protected in anti-corruption investigations, thus extracting more rents by selling SOE assets at substantial discounts. Consequently, the privatizations conducted by the local politicians with patronage connections achieve significantly lower gains in efficiency and performance. To identify the role of patronage connection in privatization, we use the mandatory retirement age cut-offs of Central Committee members in the regression discontinuity design. We find drops in price discounts of privatization deals and jumps in efficiency for privatized SOEs when local politicians lose connections to Central Committee members around the retirement age cut-offs.
  • Hasan, Iftekhar; Song, Liang; Wachtel, Paul (2013)
    BOFIT Discussion Papers 20/2013
    Published in Journal of Comparative Economics, Volume 42, Issue 1, February 2014, Pages 92–108
    Better developed legal and political institutions result in greater availability of reliable firm-specific information. When stock prices reflect more firm-specific information there will be less stock price synchronicity. This paper traces the experience of China, an economy undergoing dramatic institutional change in the last 20 years with rich variation in experiences across provinces. We show that stock price synchronicity is lower when there is institutional development in terms of property rights protection and rule of law. Further-more, we investigate the influence of political pluralism on synchronicity. A more pluralistic regime reduces uncertainty and opaqueness regarding government interventions and therefore increases the value of firm-specific information that reduces synchronicity. JEL Classification Numbers: G14; G15; G24; G38 Keywords: Institutions; China; stock price synchronicity
  • Hasan, Iftekhar; Wachtel, Paul; Zhou, Mingming (2006)
    BOFIT Discussion Papers 12/2006
    Published in Journal of Banking & Finance, vol. 33, Issue 1, January 2009, pp. 157-170
    There have been profound changes in both political and economic institutions in China over the last twenty years.Moreover, the pace of transition has led to variation across the country in the level of development.In this paper, we use panel data for the Chinese provinces to study the role of legal institutions, financial deepening and political pluralism on growth rates.The most important institutional developments for a transition economy are the emergence and legalization of the market economy, the establishment of secure property rights, the growth of a private sector, the development of financial sector institutions and markets, and the liberalization of political institutions.We develop measures of these phenomena, which are used as explanatory variables in regression models to explain provincial GDP growth rates.Our evidence suggests that the development of financial markets, legal environment, awareness of property rights and political pluralism are associated with stronger growth. JEL Classifications: O16, P14, P16, O53
  • Freinkman, Lev; Yakovlev, Andrei (2014)
    BOFIT Policy Brief 12/2014
    Published in Post-Communist Economies, Volume 27, Issue 3, 2015: 354-369
    This paper addresses sustainable institutional arrangements to support economy-wide improvements in the investment climate in the context of a middle-income economy. The recent experience of the Agency for Strategic Initiatives (ASI) in Russia provides a valuable example of establishing a new government agency to advance economic deregulation in an environment where the political appetite for reform is limited. In our view, ASI has been the most successful institutional innovation to emerge in Russia since the 2008-09 financial crisis. Rather than engage in the traditional tussle over budget funds and benefits, ASI's mandate has been to organize a strategic dialogue with the private sector and build consensus within the government. We consider ASI's institutional set-up in light of the good practice principles adopted under Russia's "new industrial policy." Our findings suggest other middle-income economies may find ASI's experience applicable when designing institutions to support a deregulation reform agenda. While the crisis in Ukraine has triggered a fundamental shift in Russia's developmental path that is likely to make ASI's deregulation efforts largely irrelevant, the agency's practical experience remains pertinent to the broader discussion of institutional arrangements to promote deregulation.
  • Rautava, Jouko (1994)
  • Yakovlev, Andrei (2013)
    BOFIT Online 7/2013
    This paper considers the reasons for increasing the interest of Russian leaders in improving the investment climate in Russia. The paper shows that this change in economic policy is connected not only to the natural rent decline but also reflects the search of the ruling coalition for a new social base represented by successful medium-sized business. These new trends can be interpreted in terms of the "limited access order" concept developed in the recent works of Douglass North and his co-authors. Keywords: Russian transition economy, rents, bureaucracy, large and medium-sized business, response to the crises, investment climate