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ID: 175311

Does a Change of Government Influence Compliance with International Agreements? Empirical Evidence for the NATO Two Percent Targ / Blum, Johannes; Potrafke, Niklas

Potrafke, Niklas	Journal Article
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Summary/Abstract

We examine whether changes of government influence compliance with international agreements. We investigate compliance with the NATO two percent target to which all NATO countries committed themselves during the NATO summit in Wales in 2014. The dataset includes the military expenditure by NATO countries over the period 2010–2018. The results suggest that countries that do not (yet) comply with the two percent target have smaller growth rates in military expenditure relative to GDP when they experienced a large change of government, e.g. a change from a rightwing to a leftwing government, than countries that did not experience such a large change of government since the NATO summit in 2014. Countries that experienced a large change of government are, thus, less likely to comply with the two percent target. Future research should examine the credibility problem of national governments in other international agreements too.

Key Words

NATO ; Military Expenditure ; International Agreements ; Compliance ; Burden Sharing ; Credibility ;
Time Inconsistency ; Change of Government ; Two Percent Target

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ID: 108393

Excess liquidity, housing price booms and policy challenges in / Guo, Shen; Li, Chen

Guo, Shen	Journal Article
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2011.

Summary/Abstract

Incorporating asymmetric cost and benefit of supplying excess liquidity into an otherwise standard time inconsistency model, this paper offers an explanation of the excess liquidity and housing price booms recently experienced in China. We find that the central bank's incentive to stimulate economic growth with excess liquidity fuels real estate prices and accelerates inflation bias. Therefore, the central bank should free itself from the pressure to achieve an economic growth rate higher than the potential level, and assign an appropriate weight to the real estate price fluctuations in the central bank's objective function, so that the central bank's policy of stimulating economic growth with excess liquidity can be constrained.

Key Words

Excess Liquidity ; Discretionary Monetary Policy ; Housing Price Boom ; Time Inconsistency

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