Pricing Protest: The Response of Financial Markets to Social Unrest (With Mariia Bondar, Sophia Chen, Mali Chivakul, and Deniz Igan) • IMF Working Paper: March 2021
Using a new daily index of social unrest, we provide systematic evidence on the negative impact of social unrest on stock market performance. An average social unrest episode in an typical country causes a 1.4 percentage point drop in cumulative abnormal returns over a two-week event window. This drop is more pronounced for events that last longer and for events that happen in emerging markets. Stronger institutions, particularly better governance and more democratic systems, mitigate the adverse impact of social unrest on stock market returns.
Social Repercussions of Pandemics (With Sophia Chen, submitted) • IMF Working Paper: January 2021
Epidemics may have social scarring effects, increasing the likelihood of social unrest. They may also have mitigating effect, suppressing unrest by dissuading social activities. Using a new monthly panel on social unrest in 130 countries, we find a positive cross-sectional relationship between social unrest and epidemics. But the relationship reverses in the short run, implying that the mitigating effect dominates in the short run. Recent trends in social unrest immediately before and after the COVID-19 outbreak are consistent with this historic evidence. It is reasonable to expect that, as the pandemic fades, unrest may reemerge in locations where it previously existed.
Measuring Social Unrest Using Media Reports (With Maximiliano Appendino, Kate Nguyen, and Jorge de Leon Miranda, submitted) • IMF Working Paper: July 2020
We present a new index of social unrest based on counts of relevant media reports. The index consists of individual monthly time series for 130 countries, available with almost no lag, and can be easily and transparently replicated. Spikes in the index identify major events, which correspond very closely to event timelines from external sources for four major regional waves of social unrest. We show that the cross-sectional distribution of the index can be simply and precisely characterized, and that social unrest is associated with a 3 percentage point increase in the frequency of social unrest domestically and a 1 percent increase in neighbors in the next six months. Despite this, social unrest is not a better predictor of future social unrest than the country average rate.
Do persistently low nominal interest rates mean governments can safely borrow more? I argue standard models of debt sustainability cannot address this issue. The key model parameter in a wide class of models is the long-run difference between the nominal risk-free interest rate and the nominal growth rate. If negative, maximum sustainable debts are unbounded. Data from five advanced economies suggest that this differential is indeed likely negative; different approaches all produce negative point estimates and confidence intervals implying low probabilities of positive values. And even if the long-run differential were positive, the quantitative impact of short-term fluctuations is tiny.
I use a novel monthly panel of provincially-collected central government revenues and conflict fatalities to estimate government revenues lost due to conflict in Afghanistan since 2005. Headline estimates are large, implying future revenue gains from peace of about 6 percent of GDP per year and total revenue losses of $3bn since 2005. The key challenge to identification is omitted variable bias, which I address by extending Powell’s (2017) generalized synthetic control method to a dynamic setting. This allows estimation of impulse response functions robust to very general forms of omitted variables bias.
Why are Countries’ Asset Portfolios Exposed to Nominal Exchange Rates? (With Jonathan Adams), Journal of International Money and Finance, February 2021 • IMF Working Paper: December 2017 • Published version
Most countries hold large gross asset positions, lending in their domestic currency and borrowing in foreign currency. As a result, their balance sheets are exposed to nominal exchange rate movements. We argue that when asset markets are incomplete, this exposure provides partial insurance against shocks that move exchange rates. We demonstrate that this insurance motive can simultaneously generate realistic gross asset positions and resolve the Backus-Smith puzzle: that countries’ relative consumption and real exchange rates are negatively correlated. Local perturbation methods are inaccurate in this setting as they approximate around the wrong interest rate, even when they correctly characterize the average portfolio holdings. So to accurately solve the equilibrium portfolio problem, we extend Maliar and Maliar (2015)’s global projection method.
PhD, Economics • June 2016
M.Sc. Econometrics & Mathematical Economics, with Distinction • June 2008
M.A. Mathematics, First Class • June 2005
R package implementing Powell's (2017) Generalized Synthetic Control method. This allows consistent estimation of treatment effect when 1) omitted variables are not fully captured by time and unit fixed effects, and 2) treatment is non-dichotomous. The package provides functions for calculating point estimates and for hypothesis testing.
Links: Vignette CRAN github page