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Author:Azzimonti-Renzo, Marina 

Working Paper
The dynamics of public investment under persistent electoral advantage

This paper studies the effects of asymmetries in re-election probabilities across parties on public policy and their subsequent propagation to the economy. The struggle between groups that disagree on targeted public spending (e.g., pork) results in governments being endogenously short-sighted: Systematic underinvestment in infrastructure and overspending on targeted goods arise, above and beyond what is observed in symmetric environments. Because the party enjoying an electoral advantage is less short-sighted, it devotes a larger proportion of revenues to productive investment. Hence, ...
Working Papers , Paper 13-43

Working Paper
Financial globalization, inequality, and the raising of public debt

During the last three decades, the stock of government debt has increased in most developed countries. During the same period, we also observe a significant liberalization of international financial markets and an increase in income inequality in several industrialized countries. In this paper we propose a multicountry political economy model with incomplete markets and endogenous government borrowing and show that governments choose higher levels of public debt when financial markets become internationally integrated and inequality increases. We also conduct an empirical analysis using OECD ...
Working Papers , Paper 12-6

Journal Article
Barriers to foreign direct investment under political instability

Economic Quarterly , Volume 93 , Issue Sum , Pages 287-315

Working Paper
Polarized business cycles

We are motivated by four stylized facts computed for emerging and developed economies: (i) business cycle movements are wider in emerging countries; (ii) economies in emerging countries experience greater economic policy uncertainty; (iii) emerging economies are more polarized and less politically stable; and (iv) economic policy uncertainty is positively related to political polarization. We show that a standard real business cycle (RBC) model augmented to incorporate political polarization, a `polarized business cycle' (PBC) model, is consistent with these facts. Our main hypothesis is that ...
Working Papers , Paper 13-44

Working Paper
Partisan conflict

American politics have become extremely polarized in recent decades. This deep political divide has caused significant government dysfunction. Political divisions make the timing, size, and composition of government policy less predictable. According to existing theories, an increase in the degree of economic policy uncertainty or in the volatility of fiscal shocks results in a decline in economic activity. This occurs because businesses and households may be induced to delay decisions that involve high reversibility costs. In addition, disagreement between policymakers may result in ...
Working Papers , Paper 14-19

Briefing
How Are Women Represented in Economic Research at the Fed?

At the Center for Advancing Women in Economics (AWE), we constructed and curated a dataset of women researchers with PhDs in economics (and related fields) employed in the research departments of the 12 regional Federal Reserve Banks. We summarize methodological aspects of the data-gathering process and provide a snapshot of women's representation among researchers at the Reserve Banks. We highlight the importance of broadening the representation of women to diversify monetary policy and central banking decision-making. We also discuss some of the difficulties in hiring women at the Reserve ...
Richmond Fed Economic Brief , Volume 23 , Issue 40

Journal Article
The political economy of balanced budget amendments

A balanced budget amendment is a constitutional rule requiring that the government collect enough revenue to finance its expenditures every year. The motivation for introducing such a rule is the desire to restrict deficit spending and limit increases in government debt. However, policymakers strongly disagree about the rule?s coverage and provisions. In particular, they disagree on how to define the terms revenue and expenditures and under which conditions exceptions to the rule should be allowed. In this article, Marina Azzimonti provides an overview of the arguments raised by proponents ...
Business Review , Issue Q1 , Pages 11-20

Working Paper
The dynamics of public investment under persistent electoral advantage

This paper studies the effects of asymmetries in re-election probabilities across parties on public policy and its subsequent propagation to the economy. The struggle between opposing groups ? that disagree on the composition of public consumption ? results in governments being endogenously short-sighted: Systematic under investment in infrastructure and overspending on public goods arise, as resources are more valuable when in power. Because the party enjoying an electoral advantage is relatively less short-sighted, it devotes a larger proportion of government revenues to productive public ...
Working Papers , Paper 11-23

Working Paper
Partisan cycles and the consumption volatility puzzle

Standard real business cycle theory predicts that consumption should be smoother than output, as observed in developed countries. In emerging economies, however, consumption is more volatile than income. In this paper the authors provide a novel explanation of this phenomenon, the ?consumption volatility puzzle,? based on political frictions. They develop a dynamic stochastic political economy model where parties that disagree on the size of government (right-wing and left-wing) alternate in power and face aggregate uncertainty. While productivity shocks affect only consumption through ...
Working Papers , Paper 11-21

Briefing
Partisan Conflict in the U.S. and Potential Impacts on the Economy

Partisan conflict is not new, either in American politics or elsewhere. For economists, politics per se is not of central interest, but its implications for economic activity are. The more specific step we take in this article is to relay how partisan legislative disagreement has evolved and how that may affect the economy. Of particular interest are the effects on how businesses delay hiring and investment when facing high policy uncertainty. We will focus on fiscal policy since it, unlike monetary policy, must be negotiated in legislative settings. We will also concentrate attention here on ...
Richmond Fed Economic Brief , Volume 23 , Issue 20

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