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31. Hegemony and International Alignment

Author:
Fernando Broner, Alberto Martin, Josefin Meyer, Christoph Trebesch, and Jiaxian Zhou Wu
Publication Date:
05-2025
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This article explores the interplay between economic hegemony and political alignment. Using theoretical and empirical insights from Broner et al. (2024), we posit that hegemonic states, such as the U.S., foster political alignment, which enhances globalization. We use UN voting data to proxy for international alignment and show that hegemons induce alignment. This data has shortcomings, however. UN voting only covers the post-WWII period, refers to a narrow set of issues, and displays little time variation. As for military alliances, they were not widely used before the mid-20th century. We propose an alternative measure of alignment based on international treaties.
Topic:
Globalization, International Trade and Finance, Political Economy, Treaties and Agreements, Hegemony, Multipolarity, and Geoeconomics
Political Geography:
Global Focus and United States of America

32. Jordan and the October 7th War: Between National Interests and Palestinian Solidarity

Author:
Ronen Yitzhak
Publication Date:
03-2025
Content Type:
Working Paper
Institution:
Moshe Dayan Center for Middle Eastern and African Studies
Abstract:
In the latest issue of Tel Aviv Notes, Ronen Yitzhak examines the effects of the October 7 war on the politics and stability of Jordan.
Topic:
Politics, Bilateral Relations, October 7, and 2023 Gaza War
Political Geography:
Middle East, Israel, Palestine, Jordan, and United States of America

33. The New Geopolitics and South Asia’s Trade Architecture – What Next?

Author:
Ganeshan Wignaraja, Amit Bhandari, and Aliasger Bootwalla
Publication Date:
05-2025
Content Type:
Working Paper
Institution:
Gateway House: Indian Council on Global Relations
Abstract:
Geopolitics is increasingly intertwined with the economic destiny of South Asia. Even before the U.S. tariffs were rolled out, growing polycrises had hit the global economy, which has been struggling since the pandemic. South Asia seems a relatively bright spark of regional trade and growth. This paper analyses South Asia’s trade architecture in the backdrop of a sluggish world economy in the 2020s, and makes recommendations for closer regional economic integration.
Topic:
Economics, Geopolitics, Economic Growth, Tariffs, and Trade
Political Geography:
South Asia and United States of America

34. Management practices, competition, and multi-product firms in developing countries

Author:
Victor Gimenez-Perales and Alina Mulyukova
Publication Date:
09-2025
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
We study how liberalization and competition affect firms’ output and product scope depending on management practices. In a model of multi-product firms, we show that firms with better management practices specialize in fewer products with lower marginal costs. The model predicts that, under increased competition, firms with better management practices are less adversely affected by competition, especially in heterogeneous sectors. Evidence from India’s de-reservation policy supports these predictions. Our simulations estimate a 0.29% welfare gain in India from the policy. The same policy could increase welfare by 0.39% in an environment with better management practices, such as the US, highlighting the management practices’ role in liberalization outcomes.
Topic:
Development, Economics, Business, Innovation, Management, and Liberalization
Political Geography:
South Asia, India, and United States of America

35. Sovereign vs. Corporate Debt and Default: More Similar Than You Think

Author:
Gita Gopinath, Josefin Meyer, Carmen Reinhart, and Christoph Trebesch
Publication Date:
04-2025
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Theory suggests that corporate and sovereign bonds are fundamentally different, also because sovereign debt has no bankruptcy mechanism and is hard to enforce. We show empirically that the two assets are more similar than you think, at least when it comes to high-yield bonds over the past 20 years. We use rich new data to compare high-yield US corporate (“junk”) bonds to high-yield emerging market sovereign bonds 2002-2021. Investor experiences in these two asset classes were surprisingly aligned, with (i) similar average excess returns, (ii) similar average risk-return patterns (Sharpe ratios), (iii) similar default frequency, and (iv) comparable haircuts. A notable difference is that the average default duration is higher for sovereigns. Moreover, the two markets co-move differently with domestic and global factors. US “junk” bond yields are more closely linked to US market conditions such as US stock returns, US stock price volatility (VIX), or US monetary policy.
Topic:
Economics, Sovereign Debt, Sovereign Default, and Corporate Bonds
Political Geography:
North America and United States of America

36. Spatial distribution of housing liquidity

Author:
Francisco Amaral, Mark Toth, and Jonas Zdrzalek
Publication Date:
03-2025
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper examines the relationship between location, liquidity, and prices in housing markets. We construct spatial datasets for German and U.S. cities and show that liquidity and prices decline with distance to the city center. To rationalize these results, we build a structural model with spatial search frictions. We argue that location preferences concentrate buyers in central areas, making markets tighter, more liquid, and driving up prices. Counterfactuals show that suppressing search frictions raises welfare and prices, especially in peripheral areas. Our findings highlight the importance of demand-side preferences and search frictions for understanding liquidity and asset prices.
Topic:
Economics, Financial Markets, Cities, Housing, Real Estate, Liquidity, and Assets
Political Geography:
Europe, Germany, North America, and United States of America

37. Turkey and Israel – Cooperation through Gritted Teeth

Author:
Joseph Epstein
Publication Date:
06-2025
Content Type:
Working Paper
Institution:
Moshe Dayan Center for Middle Eastern and African Studies
Abstract:
In the shadow of Israel's Operation "Rising Lion" against Iran, the latest edition of Turkeyscope features Joseph Epstein's analysis of recent developments in Israeli-Turkish relations. Azerbaijan's mediation, pragmatic signals from Syria's new leadership, and strong U.S. encouragement are helping both nations identify mutual interests.
Topic:
International Cooperation, Bilateral Relations, Syrian War, and Mediation
Political Geography:
Iran, Turkey, Middle East, Israel, Palestine, Syria, and United States of America

38. The AI Bubble and the U.S. Economy: How Long Do ‘Hallucinations’ Last?

Author:
Servaas Storm
Publication Date:
09-2025
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The U.S. is undergoing an extraordinary, AI-fueled economic boom: The stock market is soaring thanks to exceptionally high valuations of AI-related tech firms, which are fueling economic growth by the hundreds of billions of U.S. dollars they are spending on data centers and other AI infrastructure. The AI investment boom is based on the belief that AI will make workers and firms significantly more productive, which will in turn boost corporate profits to unprecedented levels. But evidence is piling up that generative AI (GenAI) is failing to deliver. This paper argues that (i) we have reached “peak GenAI” in terms of current Large Language Models (LLMs); scaling (building more data centers and using more chips) will not take us further to the goal of “Artificial General Intelligence” (AGI); returns are diminishing rapidly; (ii) the AI-LLM industry and the larger U.S. economy are experiencing a speculative bubble, which is about to burst (because of the first point); and (iii) the U.S. bet the farm on a future dominated by U.S.-owned AGI, because, for geopolitical reasons, it could not afford to risk to lose the AI-race with China; this geopolitical bet on AGI is now going bad.
Topic:
Water, Geopolitics, Economy, Profit, Artificial Intelligence, Productivity, Energy, Large Language Models (LLMs), ChatGPT, and Speculative Bubbles
Political Geography:
North America and United States of America

39. Is Fedwire Still a Subsidy That Fully Recovers Its Cost?

Author:
William Bergman
Publication Date:
07-2025
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
This paper examines the Federal Reserve’s current financial losses—unprecedented in scale—and the questionable accounting practices it uses to downplay their impact. It argues that the Fed’s selfdefined accounting standards, particularly the creation of a “deferred asset” to mask negative equity, obscure the fiscal consequences for the U.S. government and taxpayers. The analysis connects today’s losses to longstanding institutional practices, notably the Fed’s flawed costrecovery accounting for its Fedwire payment system. These issues first emerged in the late 1990s and early 2000s, when the author, then a Fed staffer, challenged the internal logic used to claim that Fedwire guaranteed payments and still avoided subsidies. The paper includes as an appendix the original 2002 draft, “Fedwire: A Subsidy That Fully Recovers Its Cost?”, which helped reveal the moral hazard and accounting inconsistencies that contributed to the 2008 crisis and continue to shape central bank risk and governance today
Topic:
Monetary Policy, Financial Crisis, Federal Reserve, Regulation, Central Bank, and Payment Systems
Political Geography:
North America and United States of America

40. Historical American Political Finance Data at the National Archives: A Preface to the INET Edition

Author:
Thomas Ferguson
Publication Date:
09-2025
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Narratives in American history, politics, and economics — even those by the most accomplished researchers — often resemble donuts: at their core lies a hole that no amount of sweet speculation can truly fill. They say almost nothing about the financing behind even the most pivotal American political campaigns and elections. Both history and the social sciences suffer greatly when facts are missing and wild guesses take their place. INET’s new data archive of historical political finance records at the National Archives marks a major step toward filling this factual void. It assembles all campaign finance reports filed by political parties and presidential candidates up to 1974, the year before the Federal Election Commission was established. A few additional files, including one from the FEC for 1976, are also included, as detailed below. This INET Working Paper outlines what users need to know to navigate the archive effectively and locate the data they require.
Topic:
History, Elections, Regulation, and Political Finance
Political Geography:
North America and United States of America