The Political Economy of Financial Markets

Abstract

The relationship between politics and financial markets is central for many, if not most, political economy arguments. The existing literature focuses on the effect of domestic and international political interests, institutions, and policy decisions on returns and volatility in stock, bond, and foreign exchange markets. This research bears implications for three major debates in political science: the distributive effects of politics, globalization and state autonomy, and the political roots of economic credibility and its tensions with democratic accountability. While the study of politics and financial markets is complicated by several theoretical and empirical challenges, recent methodological innovations in political research provide a window of opportunity for the development of the field.

Exports vs. investment: How political discourse shapes popular support for external imbalances

“…Material considerations and institutional factors can play an important role, given that external adjustment has distributive consequences that affect welfare across groups in the population (e.g. Frieden, 1991;Walter, 2013;Ferrara and Sattler, 2018). For instance, restrained wage growth and internal devaluation strategies ensure the export competitiveness of manufacturing industries.…”

the The development of financial markets in Africa: trends, challenges and prospects

“…The relationship between financial markets development and the policies adopted by political administrations are closely correlated (Ferrara and Sattler, 2018). Ferrara and Sattler (2018) provide evidence that, performance of a political administration as a policymaker is evaluated through how financial asset prices respond to their policy choices and government activities.…”

“…The relationship between financial markets development and the policies adopted by political administrations are closely correlated (Ferrara and Sattler, 2018). Ferrara and Sattler (2018) provide evidence that, performance of a political administration as a policymaker is evaluated through how financial asset prices respond to their policy choices and government activities. In Fundamental Analysis, political events, social events, economic announcements, government policy change and company earnings are important in the determination of prices of financial assets on daily basis (Bernhard and Leblang, 2006).…”

How to Combine Public Spending with Fiscal Rigour? ‘Austerity by Stealth’ in Post-Bailout Portugal (2015-2019)

“…Unemployment rose dramatically and the provision of public services was considerably weakened (Petmesidou & Glatzer 2015). This deterioration had dramatic consequences in a country with a 'dualist' welfare state -that is, with peaks of generosity for some groups and residual protection for others (Ferrara & Sattler 2018). To some extent, the reforms that the troika pushed for moderated the privileges of some and therefore reduced inequality (Perez & Matsaganis 2018).…”