Thursday, 17 October 2013

why is there no contingent debt today?

(except by defaulting countries like Greece and Argentina). If you want to find out, you can do worse than read:
Drelichman, Mauricio and Hans-Joachim Voth, "Contingent Sovereign Debt Contracts: The Historical Perspective", CESifo DICE Report 

Punchline: Philip II managed to do it - so why can't modern-day treasury departments and investment banks do what Genoese financiers and courtiers in tights got done to perfection?

Wednesday, 16 October 2013

Massacre Memories and German Car Sales

Do boycotts ever work? The Euro crisis certainly made a lot of Greeks unhappy. They promptly blamed the Germans, resulting in calls for boycott. Now, the typical result in the literature is that there isn't much of a reaction -- consumers don't on average vote with their pocket books. People want what they want, and they aren't going to change their purchases much for political reasons. Most research on US consumer behavior after the US invasion of Iraq - inexplicably not supported by the French - found no clear reduction in French wine sales in the US, for example.

Together with my PhD student Vasiliki Fouka, I thought I'd try and see if there wasn't a noticeable decline in German sales in Greece. We focus on cars - these are big ticket items, and arguably very "Teutonic". Our key finding is that sales of German cars slowed, but the pattern differed by province -- in areas where German army units and the SS committed massacres during the occupation of Greece, there was a much bigger slump.

Here is the abstract of our working paper:
During the Greek debt crisis after 2010, the German government insisted on  harsh austerity measures. This led to a rapid cooling of relations between the Greek and German governments. We compile a new index of public acrimony between Germany and Greece based on newspaper reports and internet search terms. This information is combined with historical maps on German war crimes during the occupation between 1941 and 1944. During months of open conflict between German and Greek politicians,   German car sales fell markedly more than those of cars from other countries. This was especially true in areas affected by German reprisals during World War II: areas where German troops committed massacres and destroyed entire villages curtailed their purchases of German cars to a  greater extent during conflict months than other parts of Greece. We conclude that cultural aversion was a key determinant of purchasing behavior, and that memories of past conflict can affect economic choices in a time-varying fashion. These findings are compatible with behavioral models emphasizing the importance of salience for individual decision-making.
The working paper is on SSRN and at CEPR. If you happen to be in the Cambridge area - you can hear Vicky on Monday, October 18th, at the Harvard Economic History Tea.

Wednesday, 2 October 2013


to my PhD student Marc Goni Trafach, who has just won the UPF Teaching Award. Did I mention he is on the market this year?