In recent years, the support of populist parties has risen strongly in Western Democracies; the Brexit vote in the United Kingdom, the success of the Front National in France and the rise of the AfD in Germany are very prominent examples of this phenomenon. A prominent literature strand proposes the cultural backlash hypothesis to be an explanation of this trend: Populist voting behaviour is driven by a reaction against progressive cultural changes. Progressive value shifts have created a sense of displacement among those with more traditional views leading to a higher appeal of populist parties. In this project, I aim to experimentally isolate this channel and prove the causal power of this hypothesis. 

If you have any comments on this, let me know!

The idea of self-fulfilling investor expectations as drivers of fluctuations in sovereign bond yield spreads is widespread among researchers and policymakers. However, despite its pervasiveness, evaluating if spreads are really driven by such self-fulfilling expectations, poor economic fundamentals, or by a combination of both, is challenging. To disentangle these drivers of fluctuations in spreads, we use an optimized large language model (LLM) program to measure investor expectations towards countries’ solvencies based on earnings conference calls of financial institutions. Then, we use this measure in a two-stage empirical strategy. First, employing an event-study approach, we identify spreads that are not supported by economic fundamentals. Second, we use the derived index of investor expectations to investigate the extent to which fluctuations, unsupported by economic fundamentals, are driven by expectations. We apply our approach to the European Sovereign Debt Crisis spanning 2008 to 2012.

In this paper, I argue that the presence of investors who gamble on financial markets can distort asset prices. I present a stylized model with two agents, an agent investing according to her consumption preferences and an agent who gambles on the stock market. By systematically buying into risky assets, the gambling agent increases the market price for

risk compared to a pareto-efficient benchmark equilibrium.

I have this model lying around, if someone wants to do something with it, let me know!

In this project, I focus on the question: 

How do the EU agricultural subsidies affect local economies in Europe?