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Table 1: Empirical Regularities of Stabilization Programs in Chronic Inflation Countries
Exchange-rate-based stabilization Money-based stabilization Slow convergence of the inflation rate to the rate of Slow convergence of the inflation rate to the rate of devaluation growth of the money supply Initial increase in real GDP and private consumption Initial contraction in economic activity followed by a later contraction
Real appreciation of the domestic currency Real appreciation of the domestic currency
Deterioration of the trade balance and current account No definite response of the trade balance and the current deficit account Ambiguous impact response of domestic real interest Initial increase in domestic real interest rates rates
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Table 2: Real Plan - Voting Intentions
Cardoso Lula June 17% 39% July 27% 30% August 45% 23% September 43% 22% October (results) 54% 27% Source: Stein and Streb (1997)
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45Wkh h{fhswlrqv duh wkh Wxunlvk surjudp dqg wkh ERQH[ lq Dujhqwlqd1 Lw wrrn Phqhp vl{ prqwkv wr dgrsw wkh surjudp diwhu wu|lqj gl huhqw srolflhv wr vwdelol}h wkh udwh ri lq dwlrq1 Doo rwkhu PEV surjudpv zhuh dgrswhg uljkw diwhu wkh hohfwhg suhvlghqw wrrn srzhu1
43 Figure 1: Quarterly GDP Growth Rates (Argentina 1980-2000)
0.08
0.06
Convertibiity Plan 0.04 April 91
Bonex Plan 0.02 Austral Plan Dec 89 June 85
0
-0.02 Election Election Oct 91 Oct 85 Election May 89 -0.04 Mar-81 Mar-82 Mar-83 Mar-84 Mar-85 Mar-86 Mar-87 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99
Figure 2: Quarterly GDP Growth Rates (Brazil 1980-2000)
0.03
Cruzado Plan Collor Plan Real Plan Feb 86 Mar 90 Jul 94 0.02
0.01
0
-0.01 Election Nov 86 Election Election Nov 94 Nov 89 -0.02
-0.03
-0.04 Mar-81 Mar-82 Mar-83 Mar-84 Mar-85 Mar-86 Mar-87 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99
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Table 3: Stabilization Plans and Timing of Elections
9 Months Before t* 9 Months After
Aridor I (Israel) Package Deal I (Israel) Cohen-Orgad (Israel) Package Deal II (Israel) Plan February 1985 (Bolivia) Plan 1983 (Iceland) E Austral I (Argentina) Plan 1985 (Peru) R Cruzado (Brazil) Plan BB (Argentina) February Plan (Argentina) Plan January 2000 (Turkey) B Plan 1987 (Mexico) Plan August 1985 (Bolivia) S Primavera II (Argentina) Convertibility (Argentina) Real (Brazil)
Bonex (Argentina) Collor (Brazil) M Plan 1990 (Dominican Rep.) B Plan 1990 (Peru) S
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46 Table 3: The Sample of Stabilization Programs*
Stabilization Program Beginning Date Type Elections Before Elections After Turkey 1980 Jan-80 MBS Jun-77 Nov-83 Israel – Aridor I Dec-80 ERBS May-77 Jun-81 Israel – Aridor II Sep-82 ERBS Jun-81 Jul-84 Bolivia 1982 Nov-82 ERBS Jul-80 Jul-85 Iceland 1983 May-83 ERBS Apr-83 Apr-87 Israel – Cohen-Orgad Dec-83 ERBS Jun-81 Jul-84 Bolivia 1984 Apr-84 ERBS Jul-80 Jul-85 Israel – Package Deal I Jul-84 ERBS Jul-84 Nov-88 Israel – Package Deal II Nov-84 ERBS Jul-84 Nov-88 Bolivia 1985 - I Feb-85 ERBS Jul-80 Jul-85 Israel – Package Deal III Feb-85 ERBS Jul-84 Nov-88 Argentina – Austral I Jun-85 ERBS Oct-83 Oct-85 Israel - New Shekel Jul-85 ERBS Jul-84 Nov-88 Bolivia 1985 - II Aug-85 ERBS Jul-85 May-89 Peru 1985 Aug-85 ERBS Apr-85 Apr-90 Brazil – Cruzado Plan Feb-86 ERBS Nov-82 Nov-86 Argentina – Primavera Plan I Aug-86 ERBS Oct-85 Oct-87 Argentina – February Plan Feb-87 ERBS Oct-85 Oct-87 Brazil – Bresser Plan Jun-87 ERBS Nov-86 Nov-89 Argentina – Austral II Oct-87 ERBS Oct-85 Oct-87 Mexico 1987 Dec-87 ERBS Jul-85 Jul-88 Brazil – Gradualist Plan Apr-88 ERBS Nov-86 Nov-89 Argentina – Primavera II Plan Aug-88 ERBS Oct-87 May-89 Brazil – Summer Plan 1988 Jan-89 ERBS Nov-86 Nov-89 Argentina - BB Plan Jul-89 ERBS May-89 Oct-91 Argentina - BONEX Dec-89 MBS May-89 Oct-91 Brazil – Collor Plan Mar-90 MBS Nov-89 Oct-94 Dominican Republic 1990 Aug-90 MBS May-90 May-94 Peru 1990 Aug-90 MBS Apr-90 Apr-95 Uruguay 1990 Dec-90 ERBS Nov-89 Nov-94 Nicaragua 1991 Mar-91 ERBS Feb-90 Oct-96 Argentina – Convertibility Plan Apr-91 ERBS May-89 Oct-91 Brazil - Real Plan Jul-94 ERBS Nov-89 Oct-94 Turkey 2000 Jan-00 ERBS Apr-99 Nov-02
*References for the stabilization programs can be found in Kiguel and Liviatan(1991), Heyman(1991) and Calvo and Vegh(1999) for Argentina, Morales(1988) and Agenor and Montiel (1999) for Bolivia, Kiguel and Liviatan(1991) and Calvo and Vegh(1999) for Brazil, Medeiros(1994) for Dominican Republic, Andersen and Guomundsson(1998) for Iceland, Razin(1991) and Calvo and Vegh(1999) for Israel, Calvo and Vegh(1999) for Mexico, Reyes(1999) for Nicaragua, Agenor and Montiel(1999) and Calvo and Vegh(1999) for Peru, Calvo and Vegh (1999) for Uruguay and Rodrik(1991) and Aruoba(2001) for Turkey. Data for elections can be found in the Lijphart elections archives.
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4: Figure 3: Distribution of ERBS - MBS by Months to the Next Election
50%
ERBS MBS
40%
30%
20%
10%
0% 0-17 18-34 35-51 52-68 Months to the Next Election
Figure 4: Distribution of ERBS- MBS by Months from Past Elections
100%
80%
ERBS MBS
60%
40%
20%
0% 0-12 13-24 25-48 49-80 Months from Past Election
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khwhurvnhgdvwlflw| lv d yhu| frpprq sureohp lq furvv0vhfwlrq dqdo|vlv dq hvwlpdwru ri yduldqfh pruh urexvw wkdq wkh wudglwlrqdo frpsxwdwlrq zloo eh xvhg156 Wkhuhiruh/doo vwdqgdug huuruv fdofxodwhg wkurxjkrxw wkh hfrqrphwulf dqdo|vlv duh urexvw +fruuhfwhg iru khwhurvnhgdvwlflw|, xvlqj wkh Kxehu0Zklwh0Vdqgzlfk phwkrg1 Ehorz/Wdeoh 8 suhvhqwv wkh uhvxowv ri d vhw ri uhjuhvvlrqv xvlqj gl huhqw frpelqdwlrqv ri wkh yduldeohv prqwkv wr qh{w hohfwlrq/uhvhuyhv/rshqhvv/srolwlfdo iudjphqwdwlrq dqg jurzwk dv uhjuhvvruv1 56Wkh srvvleoh suhvhqfh ri khwhurvnhgdvwlflw| lq wkh prgho pljkw eh/ iru lqvwdqfh/ d uhvxow ri wkh idfw wkdw frxqwulhv zlwk kljk ohyhov ri lqwhuqdwlrqdo uhvhuyhv fdq kdyh erwk fkrlfhv ri qrplqdo dqfkru wr vwdelol}h lq dwlrq zkhuhdv frxqwulhv zlwk orz ohyhov ri uhvhuyhv fdqqrw fkrrvh wkh h{fkdqjh udwh dv d yldeoh dqfkru kdylqj wr uho| rq d prqhwdu| djjuhjdwh1 56 Table 5 - Regression Variants using Absolute Distance to Next Elections (1) (2) (3) (4) (5) (6) ERBS ERBS ERBS ERBS ERBS ERBS log (Months to Next Elections) -2.260 *** -1.932 *** -2.117 ** -1.363 * -2.053 *** -1.029 ** (0.72) (0.60) (1.06) (0.71) (0.77) (0.48) Reserves 16.312 ** 16.661 ** 11.764 * 14.919 ** (7.61) (7.99) (6.71) (5.95) Openness 3.374 ** 3.452 ** 3.474 *** 3.496 *** (1.58) (1.43) (1.13) (1.35) Fragmentation 2.43 *** 1.635 1.9 * -0.772 (0.93) (1.09) (1.15) (0.80) Growth 20.778 (33.08) Constant 2.815 2.285 5.08 1.630 7.377 ** 4.527 *** (2.27) (1.79) (3.92) (1.70) (3.13) (1.73) Prob > Chi2 0.0044 0.0009 0.0000 0.0664 0.0024 0.0311 Pseudo R2 0.6266 0.6151 0.5770 0.4931 0.4297 0.1947 Observations 33 33 33 33 33 33 Robust standard errors in parentheses * significant at 10%; ** significant at 5%; *** significant at 1% Wkh vljq ri wkh frh!flhqwv iru prqwkv wr qh{w hohfwlrq dv zhoo dv wkh vljqv ri wkh uhpdlqlqj uhjuhvvruv duh frkhuhqw zlwk wkh edvlf lqwxlwlrq h{srvhg suhylrxvo|157 Dffruglqjwrwkhwdeoh/ prgho +4, lv wkh ehvw lq whupv ri vshfl fdwlrq1 Hyhq wkrxjk lq wklv vshfl fdwlrq jurzwk lv qrw vwdwlvwlfdoo| vljql fdqw/glvwdqfh lq prqwkv wr qh{w hohfwlrqv dqg srolwlfdo iudjphqwdwlrq duh vwdwlvwlfdoo| vljql fdqw dw 4( frq ghqfh ohyho zkloh lqwhuqdwlrqdo uhvhuyhv dqg rshqhvv duh dovr vljql fdqw dw 8( frq ghqfh ohyho1 Wklv hvwlpdwlrq frq upv wkh ydolglw| ri wkh k|srwkhvlv wkdw srolf|0pdnhuv rssruwxqlvwlfdoo| fkrrvh wkh qrplqdo dqfkru wr vwdelol}h lq dwlrq1 Dgglwlrqdo prghov zhuh hvwlpdwhg wr h{dplqh li wkh k|srwkhvlv ri wkh h{lvwhqfh ri srolw0 lfdo rssruwxqlvp ehklqg wkh fkrlfh ri qrplqdo dqfkru lv frq uphg1 Ehorz/Wdeoh 9 vkrzv hvwlpdwhv ri d uhjuhvvlrq lq zklfk wkh yduldeoh prqwkv wr qh{w hohfwlrqv lv vxevwlwxwhg e| wkh yduldeoh prqwkv iurp sdvw hohfwlrqv1 Fohduo|/wkh lqwxlwlrq lqglfdwhv wkdw wkh vljq ri wkh frh!flhqw ri wkh yduldeoh prqwkv iurp sdvw hohfwlrqv vkrxog eh srvlwlyh1 Wkh iduwkhu dzd| wkh srolwlfldq lv iurp sdvw hohfwlrqv/wkh kljkhu vkrxog eh wkh suredelolw| ri dgrswlrq ri dq 57Wkh h{fhswlrq lv wkh vljq ri wkh frh!flhqw ri jurzwk zklfk zdv srvlwlyh lq vrph vshfl fdwlrqv exw wkh frh!flhqw zdv qhyhu vwdwlvwlfdoo| vljql fdqw gl huhqw iurp }hur1 57 HUEV1 Hyhq wkrxjk wkh vljq ri rwkhu frh!flhqwv glg qrw fkdqjh vxevwdqwldoo| frpsduhg wr wkh uhjuhvvlrq xvlqj prqwkv wr qh{w hohfwlrqv wkhlu vwdwlvwlf vljql fdqfh lv qrw dv kljk1 Table 6 - Regression Variants using Absolute Distance from Past Elections (1) (2) (3) (4) (5) (6) ERBS ERBS ERBS ERBS ERBS ERBS log (Months from Past Elections) 0.942 * 0.934 * 0.876 * 0.852 * 0.572 * 0.412 (0.51) (0.56) (0.53) (0.45) (0.29) (0.28) Reserves 18.586 ** 16.753 ** 15.753 ** 17.742 ** (8.79) (7.62) (7.85) (7.50) Openess 2.219* 1.969 2.061 2.129 (1.29) (1.51) (1.44) (1.40) Fragmentation -0.062 0.364 0.624 -0.396 (0.95) (0.90) (0.90) (0.66) Growth -18.758 (36.95) Constant -4.381 * -4.446 * -3.944 * -4.022 * -0.686 0.091 (2.41) (2.56) (2.34) (2.19) (1.07) (0.69) Prob > Chi2 0.2841 0.2601 0.2004 0.1102 0.1276 0.1426 Pseudo R2 0.4390 0.4228 0.4168 0.3710 0.1921 0.0840 Observations 33 33 33 33 33 33 Robust standard errors in parentheses * significant at 10%; ** significant at 5%; *** significant at 1% Wkh prghov h{dplqhg deryh kdyh dvvxphg wkdw rqo| wkh devroxwh glvwdqfh lq prqwkv wr ru iurp sdvw hohfwlrqv vkrxog d hfw wkh srolf|0pdnhu ghflvlrq uhjduglqj wkh qrplqdo dqfkru wr vwdelol}h lq dwlrq1 Lq idfw/lw fdq eh dujxhg wkdw vl{ prqwkv ehiruh dq hohfwlrq lv h{dfwo| vl{ prqwkv ehiruh dq hohfwlrq iru srolwlfldqv zkr kdyh ehhq wzr ru irxu |hduv lq r!fh1 Qrwzlwkvwdqglqj/lw fdq dovr eh dujxhg wkdw li wkh vl}h ri wkh hohfwlrq f|foh wkdw srolf|0pdnhuv idfh lv xqhtxdo/d sursruwlrqdo phdvxuh ri glvwdqfh pljkw pruh dssursuldwh1 Wkh hvwlpdwhv rq Wdeoh : duh wkh uhvxow ri uhjuhvvlrqv wkdw xvhg qrupdol}hg glvwdqfh wr qh{w hohfwlrqv1 Wkh qrupdol}dwlrq lv jlyhq vlpso| e| wkh udwlr ri wkh glvwdqfh wr qh{w hohfwlrq wr wkh vl}h ri wkh hohfwlrq f|foh +wkh vxp ri wkh glvwdqfhv wr dqg iurp hohfwlrqv, wkdw hdfk srolf|0pdnhu idfhv158 58Hohfwlrq f|foh grhv qrw qhfhvvdulo| phdqv jryhuqphqw pdqgdwh1 Lw mxvw phdqv wkh shulrg lq ehwzhhq dq| wzr hohfwlrqv +suhvlghqwldo ru frqjuhvvlrqdo,1 D qhzo| hohfwhg Dujhqwlqh suhvlghqw zlwk d pdqgdwh ri irxu |hduv/ idfhv frqjuhvvlrqdo hohfwlrqv lq h{dfwo| wzr |hduv dqg wkh qh{w suhvlghqwldo hohfwlrqv lq irxu |hduv1 Hyhq wkrxjk klv pdqgdwh lv iru irxu |hduv kh idfhv dq hohfwlrq f|foh ri rqo| wzr |hduv1 58 Table 7 - Regression Variants using Normalized Distance to Next Elections (1) (2) (3) (4) (5) (6) ERBS ERBS ERBS ERBS ERBS ERBS log (Months to Next Elections / Cycle) -4.391 *** -4.319 *** -3.799 ** -4.219 ** -2.577 ** -1.391 ** (1.66) (1.50) (1.86) (1.67) (1.23) (0.68) Reserves 27.039 *** 26.852 *** 16.598 ** 27.041 *** (9.59) (10.08) (8.07) (10.49) Openess 2.987 * 3.036 * 2.831 ** 2.89 ** (1.70) (1.78) (1.41) (1.46) Fragmentation 3.099 ** 2.9 ** 3.285 ** -0.281 (1.40) (1.31) (1.36) (0.73) Growth 4.794 (34.64) Constant -8.095 *** -7.896 *** -3.753 ** -7.269 *** -0.771 0.445 (2.99) (2.80) (1.69) (2.81) (0.94) (0.37) Prob > Chi2 0.1090 0.0593 0.0605 0.0594 0.0856 0.0418 Pseudo R2 0.6708 0.6700 0.5675 0.5928 0.3524 0.1703 Observations 33 33 33 33 33 33 Robust standard errors in parentheses * significant at 10%; ** significant at 5%; *** significant at 1% Wkh frh!flhqwv* vljqv dqg vwdwlvwlf vljql fdqfh ri doo wkh yduldeohv gr qrw fkdqjh vxe0 vwdqwldoo| iurp wkh vshfl fdwlrq xvlqj devroxwh phdvxuhv ri glvwdqfh1 Ehorz/Wdeoh ; uhsurgxfhv wkh uhvxowv ri wkh vdph h{huflvh xvlqj lqvwhdg qrupdol}hg glvwdqfh iurp sdvw hohfwlrqv1 Djdlq/frh!flhqw vljqv dqg vwdwlvwlf vljql fdqfh gr qrw fkdqjh frqvlghudeo| lqglfdwlqj wkh srolwlfdo rssruwxqlvp k|srwkhvlv lv urexvw wr wklv fkdqjh lq wkh prgho vshfl fdwlrq1 59 Table 8 - Regression Variants using Normalized Distance from Past Elections (1) (2) (3) (4) (5) (6) ERBS ERBS ERBS ERBS ERBS ERBS log (Months from Past Elections / Cycle) 1.241 ** 1.247 ** 1.140 ** 1.057 ** 0.816 *** 0.500 ** (0.58) (0.54) (0.49) (0.53) (0.28) (0.24) Reserves 18.442 ** 18.397 ** 16.691 ** 19.581 ** (8.43) (7.99) (7.23) (9.29) Openess 3.060 * 3.047 3.142 * 3.079 (1.66) (1.88) (1.85) (1.99) Fragmentation 0.687 0.723 1.050 -0.397 (1.04) (0.95) (1.03) (0.66) Growth -1.212 (39.36) Constant -1.228 -1.238 -0.657 -1.045 1.600 ** 1.812 *** (1.03) (1.01) (0.83) (1.10) (0.66) (0.46) Prob > Chi2 0.2297 0.1540 0.0842 0.4506 0.0299 0.0392 Pseudo R2 0.5445 0.5445 0.5278 0.1703 0.2922 0.1311 Observations 33 33 33 33 33 33 Robust standard errors in parentheses * significant at 10%; ** significant at 5%; *** significant at 1% Surfhhglqj zlwk wkh lghd ri whvwlqj krz urexvw wr rwkhu vshfl fdwlrqv duh wkh uhvxowv suhylrxvo| rewdlqhg/d prgho lqfrusrudwlqj erwk phdvxuhv ri glvwdqfh wr dqg iurp hohfwlrqv lv frqvlghuhg1 Wkh prgho wr eh hvwlpdwhg lv= Et ' 'xEfq 'xEqf n q *?Ef nq2 *?Ef2 nq f n qefe n qDfD n qSfS zkhuh/dv ehiruh/ x Efq lv wkh vwdqgdug qrupdo fxpxodwlyh glvwulexwlrq1 Lq wklv prgho [ lv wkh yduldeoh prqwkv wr qh{w hohfwlrqv dqg [2 lv wkh yduldeoh prqwkv iurp sdvw hohfwlrqv1 Doo rwkhu uhjuhvvruv duh wkh vdph suhylrxvo| xvhg lq wkh ehqfkpdun prgho dv zhoo dv lq rwkhu vshfl fdwlrqv1 Wklv prgho lv lqwhuhvwlqj vlqfh lw lv srvvleoh wr h{dplqh wkh lpsdfw rq wkh suredelolw| ri fkrrvlqj dq HUEV ri d pdujlqdo lqfuhdvh ri d prqwk lq wkh hohfwlrq f|foh kroglqj hlwkhu wkh glvwdqfh wr qh{w ru iurp sdvw hohfwlrqv frqvwdqw1 Wkh edvlf lqwxlwlrq iurp wkh suhylrxv prghov vkrxog dovr iroorz iru wklv vshfl fdwlrq1 Dq lqfuhdvh ri d prqwk lq wkh hohfwlrq f|foh/ kroglqj prqwkv iurp sdvw hohfwlrqv frqvwdqw/dggv d prqwk wr wkh glvwdqfh wr qh{w hohfwlrqv uhgxflqj wkh suredelolw| ri dgrswlrq ri dq HUEV1 Lw lv lpsruwdqw wr phqwlrq wkdw wklv prgho 5: grhv qrw vx hu iurp ixoo pxowlfrolqhdulw| vlqfh wkh vl}h ri wkh hohfwlrq f|foh lv qrw htxdo wr doo srolf|0pdnhuv159 Ehorz/Wdeoh < vkrzv wkh hvwlpdwhv ri wklv xquhvwulfwhg jhqhudo surelw prgho lqfoxglqj erwk phdvxuhv ri glvwdqfh wr dqg iurp hohfwlrqv1 Table 9 - Regression Variants using Distance to Next Elections and Distance from Past Elections (1) (2) (3) (4) (5) (6) ERBS ERBS ERBS ERBS ERBS ERBS log (Months to Next Elections) -2.091 *** -1.664 ** -1.96 -1.139 -2.015 ** -1.072 * (0.68) (0.70) (1.30) (0.79) (0.88) (0.62) log (Months from Past Elections) 0.538 0.525 0.445 0.618 0.144 0.04 (0.58) (0.53) (0.53) (0.46) (0.30) (0.36) Reserves 19.069 * 19.701 ** 14.249 * 20.964 ** (9.78) (9.91) (8.31) (8.78) Openness 3.246 ** 3.408 ** 3.563 *** 3.478 ** (1.54) (1.51) (1.29) (1.44) Fragmentation 2.817 *** 1.832 2.142 * -0.785 (1.02) (1.19) (1.27) (0.82) Growth 23.879 (32.60) Constant 0.588 -0.175 3.367 -1.448 6.992 * 4.555 * (4.14) (3.74) (5.57) (3.00) (3.77) (2.75) Prob > Chi2 0.0041 0.0023 0.0020 0.1555 0.0072 0.0755 Pseudo R2 0.6528 0.6394 0.5943 0.5318 0.4300 0.2149 Observations 32 32 32 32 32 32 Robust standard errors in parentheses * significant at 10%; ** significant at 5%; *** significant at 1% Wkh vljq ri wkh frh!flhqwv iru prqwkv wr qh{w hohfwlrq dqg prqwkv iurp sdvw hohfwlrq dv zhoo dv wkh vljq ri wkh uhpdlqlqj uhjuhvvruv lv frkhuhqw zlwk wkh edvlf lqwxlwlrq h{srvhg suhylrxvo|1 Qhyhuwkhohvv/wkh vwdwlvwlf vljql fdqfh ri erwk phdvxuhv ri glvwdqfh lv uhgxfhg vxevwdqwldoo| wkurxjkrxw wkh gl huhqw vshfl fdwlrqv1Wklv lv wkh uhvxow ri wkh vwurqj frolqhdulw| h{lvwhqw ehwzhhq erwk phdvxuhv ri glvwdqfh +vhh qrwh 59,1 Lqwhuqdwlrqdo uhvhuyhv/rshqhvv dqg srolwlfdo iudjphqwdwlrq duh djdlq kljko| vwdwlvwlfdoo| vljql fdqw lq yduldqw +4, ri wklv sduwlfxodu prgho/uhlqiruflqj wkh lghd wkdw erwk hfrqrplf dqg srolwlfdo yduldeohv/dvlgh iurp glvwdqfh wr ru iurp hohfwlrqv/d hfw wkh ghflvlrq ryhu wkh qrplqdo dqfkru wr vwdelol}h lq dwlrq1 Wkhuhiruh/ 59Li wkh hohfwlrq f|foh zdv h{dfwo| wkh vdph iru doo srolf|0pdnhuv dqg wkh glvwdqfh phdvxuhv zhuh gh qhg lq olqhdu irup +qrw orjv,/ prqwkv wr qh{w hohfwlrqv zrxog eh d olqhdu frpelqdwlrq ri prqwkv iurp sdvw hohfwlrqv1 Wklv idfw/ lq wxuq/ zrxog jhqhudwh ixoo pxowlfrolqhdulw| pdnlqj lpsrvvleoh wkh hvwlpdwlrq ri wklv sduwlfxodu prgho1 Qrqhwkhohvv/ lw lv uhdvrqdeoh wr dvvxph wkdw erwk phdvxuhv ri glvwdqfh duh vwurqjo| frolqhdu dqg lw lv olnho| wkdw wkh vwdwlvwlf vljql fdqfh ri wkh hvwlpdwhg frh!flhqwv zloo eh uhgxfhg1 5; lq vslwh ri wkh vshfl fdwlrq fkrvhq iurp doo wkh prghov frqvlghuhg lq wkh hfrqrphwulf dqdo|vlv/ wkh uhvxowv ohdg wr wkh vdph frqfoxvlrq/qdpho| wkdw wkh hohfwlrq f|foh lv uhohydqw iru wkh ghwhuplqdwlrq ri wkh qrplqdo dqfkru wr vwdelol}h lq dwlrq1 914 Pdujlqdo H hfwv Vlqfh wkh frh!flhqwv hvwlpdwhg e| wkh surelw uhjuhvvlrqv duh gl huhqw iurp wkh pdujlqdo h hfwv ri fkdqjhv wr wkh uljkw0kdqg vlgh yduldeohv rq wkh suredelolw| ri dq HUEV/wkh uhvxowlqj qxpehuv rq wkh suhylrxv wdeohv duh qrw yhu| lqirupdwlyh1 Udwkhu wkdq uhsruw wkh pdujlqdo h hfwv dvvrfldwhg wr hdfk frh!flhqw hydoxdwlqj wkh ydoxh ri wkh rwkhu h{sodqdwru| yduldeohv dw wkhlu phdqv/d vhulhv ri h{huflvhv duh frqgxfwhg lq rughu wr h{dplqh wkh uhdo lpsdfw ri wkh gl huhqw uhjuhvvruv rq wkh suredelolw| xvlqj wkh ehqfkpdun prgho suhylrxvo| hvwlpdwhg1 Iljxuh 8 slfwxuhv krz wkh suredelolw| ri dq HUEV lqfuhdvhv dv wkh glvwdqfh wr wkh qh{w hohfwlrqv vkulqnv1 Wkh slfwxuh vwduwv iurp wkh kljkhvw ydoxh ri glvwdqfh wr qh{w hohfwlrqv lq wkh vdpsoh +Qlfdudjxd, kroglqj wkh rwkhu yduldeohv lq wkh uhjuhvvlrq wr wkhlu vdpsoh phdqv1 Dffruglqj wr Iljxuh 8/wkh suredelolw| ri dgrswlqj dq HUEV udqjhv iurp :9( wr 433( ghshqglqj krz forvh qh{w hohfwlrqv duh1 Figure 5: Predicted Probabilities with Varying Distance (Months to Next Elections)* Months to Next Probability of ERBS 100% Elections 67 0.76 60 0.83 54 0.88 90% 48 0.93 42 0.96 36 0.98 30 0.99 80% 24 1.00 Probability of ERBS 18 1.00 12 1.00 61.0070% * Reserves, openess, political fragmentation and growth 67 60 54 48 42 36 30 24 18 12 6 are evaluated at their means Distance (Months to Next Elections) Iljxuh 9 slfwxuhv wkh lpsdfw ri wkh yduldwlrq ri uhvhuyhv rq wkh suredelolw| ri dgrswlqj dq HUEV iru gl huhqw ydoxhv ri wkh glvwdqfh wr qh{w hohfwlrqv1 Dw ohdvw wkuhh lpsruwdqw lqvljkwv duh ghulyhg iurp wklv slfwxuh1 Iluvw/lw lv lqwhuhvwlqj wr qrwh wkdw qr pdwwhu krz odujh lv wkh 5< uhodwlyh vwrfn ri lqwhuqdwlrqdo uhvhuyhv/srolwlfldqv rqh |hdu ehiruh hohfwlrqv dgrsw dq HUEV zlwk dw ohdvw <3( suredelolw|1 Vhfrqg/iru yhu| orz vwrfnv ri lqwhuqdwlrqdo uhvhuyhv/d fkdqjh lq wkh glvwdqfh wr qh{w hohfwlrqv kdv d wuhphqgrxv lpsdfw rq wkh suredelolw| ri dgrswlrq ri dq HUEV1 Wkh suredelolw| mxpsv iurp dv orz dv 78( wr dv pxfk dv <3( lq wkh shulrg ri rqh |hdu1 Wkh wklug dqg odvw srlqw uhihuv wr wkh idfw wkdw li lqwhuqdwlrqdo uhvhuyhv duh odujho| dydlodeoh +dw ohdvw 73( ri P6, wkh suredelolw| ri dq HUEV lv forvh wr rqh1 Wklv lv gxh wr wkh idfw wkdw srolwlfldqv zlwk uhodwlyho| kljk ohyho ri lqwhuqdwlrqdo uhvhuyhv/fdq hpedun rq dq HUEV pxfk hduolhu vlqfh wkh h{fkdqjh udwh fdq eh nhsw {hg iru d pxfk orqjhu shulrg ri wlph1 Li lq Nuxjpdq +4<:<, lqwhuqdwlrqdo uhvhuyhv sod|hg d uroh srvwsrqlqj d ghydoxdwlrq lq wkh plgvw ri d fxuuhqf| fulvhv/wklv vhwwlqj dovr lpsolhv d whpsrudo glphqvlrq zkhuh lqwhuqdwlrqdo uhvhuyhv kdyh d uroh wr sod|1 Lq sduwlfxodu/rssruwxqlvwlf srolf|0pdnhuv zlwk pruh dydlodeoh uhvhuyhv pd| dgrsw dq HUEV pxfk hduolhu ru vlpso| fkrrvh dq HUEV idudzd| iurp hohfwlrqv zkhq lw zrxog pdnh pruh vhqvh wr fkrrvh d PEV wdnlqj lqwr dffrxqw rqo| wkh errp0exvw f|fohv uhvxowlqj iurp wkh HUEV1 Qlfdudjxd lv dq h{dpsoh ri d frxqwu| zlwk yhu| kljk uhodwlyh ohyho ri uhvhuyhv +ryhu 93(, wkdw dgrswhg dq HUEV pruh wkdq 8 |hduv ehiruh hohfwlrqv1 Figure 6: Predicted Probabilities with Varying Reserves Reserves / M3 Probability of ERBS 90% 12 Months 24 Months 36 Months 70% 0.0429* 0.92 0.44 0.14 12 Months 0.10 0.99 0.78 0.45 50% 24 Months 0.20 1.00 0.99 0.94 36 Months 0.30 1.00 1.00 1.00 30% Probability of ERBS 0.40 1.00 1.00 1.00 0.50 1.00 1.00 1.00 10% 0.6837** 1.00 1.00 1.00 0.10 0.20 0.30 0.40 0.50 * Min value of the sample 0.0429* 0.6837* ** Max value of the sample Reserves / M3 Iljxuh : slfwxuhv krz wkh glvwdqfh wr qh{w hohfwlrqv d hfwv wkh suredelolw| ri dgrswlqj dq HUEV iru gl huhqw ohyhov ri rshqhvv1 Wkh jxuh vkrzv wkdw zkhq wkh ohyhov ri rshqhvv duh yhu| orz +ohvv wkdq 8(, dv lq Wxunh| 4<;3/wkh suredelolw| ri dq HUEV lv dv orz dv 63( 63 zkhq hohfwlrqv duh idu dzd| dqg doo rwkhu yduldeohv duh hydoxdwhg dw wkhlu vdpsoh phdqv1 Dgglwlrqdoo|/iru kljk ohyhov ri rshqhvv wkh suredelolw| ri dq HUEV lv 4 uhjdugohvv ri krz idu qh{w hohfwlrqv duh1 Wkhvh uhvxowv lqglfdwh wkh ohyho ri rshqhvv pljkw olplw wkh ghjuhh ri srolwlfdo rssruwxqlvp ehklqg wkh fkrlfh ri dqfkru wr vwdelol}h lq dwlrq1 Iru h{dpsoh/qr frxqwu| lq wkh vdpsoh lv dv rshq dv Lvudho zlwk wkh vkduh ri h{sruwv soxv lpsruwv ryhu JGS vrphwlphv juhdwhu wkdq 41 Lvudho kdv dgrswhg vl{ HUEV exw qr PEV surjudpv1 Wkh uhvxowv ghulyhg iurp Iljxuh : vxjjhvw wkdw Lvudhol srolwlfldqv zhuh lqklelwhg wr fkrrvh d PEV hyhq idu dzd| iurp hohfwlrqv ehfdxvh ri wkh ulvnv ri idloxuh wr vwdelol}h lq dwlrq zlwk d prqhwdu| dqfkru lq d yhu| rshq hfrqrp|1 Figure 7: Predicted Probabilities with Varying Distance and Openess* Months to Next Probability of ERBS 100% Elections Minimum Average Maximum 80% Openess Openess Openess 67 0.31 0.76 1.00 60 0.40 0.83 1.00 60% 54 0.49 0.88 1.00 Minimum Openess 48 0.60 0.93 1.00 40% 42 0.71 0.96 1.00 Average Openess 36 0.81 0.98 1.00 Probability of ERBS 20% Maximum Openess 30 0.90 0.99 1.00 24 0.96 1.00 1.00 18 0.99 1.00 1.00 0% 12 1.00 1.00 1.00 67 60 54 48 42 36 30 24 18 12 6 6 1.00 1.00 1.00 Distance (Months to Next Elections) * Reserves, fragmentation and growth are evaluated at their means Iljxuh ; slfwxuhv krz wkh suredelolw| ri dq HUEV lv d hfwhg e| fkdqjhv lq wkh glvwdqfh wr wkh qh{w hohfwlrqv iru hdfk w|sh ri srolwlfdo hqylurqphqw +iudjphqwhg dqg qrw iudjphqwhg,1 Iru odujh ydoxhv ri wkh glvwdqfh wr wkh qh{w hohfwlrqv wkh suredelolw| lv vwulnlqjo| gl huhqw iru iudjphqwhg dqg frkhvlyh srolwlfdo hqylurqphqw1 Wkh gl huhqfh lq suredelolw| pd| uhdfk dv pxfk dv :8 shufhqwdjh srlqwv1 Wklv slfwxuh pljkw h{sodlq zk| frxqwulhv vxfk dv Dujhqwlqd dgrswhg dq HUEV surjudp vxfk dv wkh EE sodq +Dxjxvw 4<;<, idudzd| iurp ixwxuh hohfwlrqv hyhq wkrxjk sdvw hohfwlrqv kdyh rffxuuhg mxvw prqwkv ehiruh wkh vwdelol}dwlrq1 Lq idfw/ rwkhu h{fhswlrqdo vlplodu fdvhv pljkw h{lvw dqg zkhuh srolwlfldqv gr qrw hqmr| kljk srolwlfdo vxssruw hyhq diwhu uhfhqw hohfwlrqv1 Wklv pd| kdsshq/iru lqvwdqfh/li d srolwlfldq lv hohfwhg 64 pruh ehfdxvh ri wkh odfn ri jrrg dowhuqdwlyhv wkdq gxh wr khu rzq uhsxwdwlrq1 Wkh odfn ri srolwlfdo vxssruw pd| kdyh vwurqjo| frqglwlrqhg wkh fkrlfh ri wkh qrplqdo dqfkru lq wkhvh flufxpvwdqfhv15: Figure 8: Predicted Probabilities with Varying Distance and Political Fragmentation* Months to Next Probability of ERBS 100% Elections Low Political High Political 80% Fragmentation Fragmentation 67 0.11 0.89 60 0.17 0.93 60% 54 0.23 0.96 Low Political 48 0.32 0.98 40% Fragmentation 42 0.44 0.99 36 0.57 1.00 Probability of ERBS High Political 20% Fragmentation 30 0.72 1.00 24 0.86 1.00 18 0.96 1.00 0% 12 1.00 1.00 67 60 54 48 42 36 30 24 18 12 6 6 1.00 1.00 Distance (Months to Next Elections) * Reserves, openess and growth are evaluated at their means Iljxuhv 9/: dqg ; vxjjhvw wkdw wkh lpsdfw ri glvwdqfh wr qh{w hohfwlrqv rq wkh suredelolw| ri dgrswlrq ri dq HUEV pd| gl hu li wkh frxqwu| kdv d kljk ru orz ohyho ri lqwhuqdwlrqdo uhvhuyhv/dqg2ru lv kljko| rshqhg ru forvhg wr lqwhuqdwlrqdo wudgh rzv dqg2ru lv srolwlfdoo| iudjphqwhg ru frkhvlyh1 Wr whvw wklv k|srwkhvlv d uhjuhvvlrq zlwk lqwhudfwhg h{sodqdwru| yduldeohv zdv hvwlpdwhg1 Wkh uhvxowv duh vkrzq lq Wdeoh 43 ehorz1 5:Wkh 4<;< suhvlghqwldo hohfwlrqv lq Dujhqwlqd surylghv dq looxvwudwlyh h{dpsoh ri krz wkh odfn ri srolwlfdo fdslwdo pljkw frqglwlrq wkh fkrlfh ri qrplqdo dqfkru wr vwdelol}h lq dwlrq1 Hyhq li wkh qhz suhvlghqw Fduorv Phqhp zdv hohfwhg zlwk juhdw srsxodu vxssruw/ lpsruwdqw lqwhuhvw jurxsv iurp wkh exvlqhvv vhfwru/ jryhuq0 phqw exuhdxfudf| dqg wkh lqwhohfwxdo holwh zhuh vwloo uhoxfwdqw wr edfn klp1 Wklv srolwlfdo vfhqdulr frxog kdyh xqghuplqhg Phqhp*v delolw| wr odxqfk d PEV1 Lqvwhdg/ kh uhvruwhg wr dq HUEV zklfk uhtxluhg ohvv vxssruw dqg pljkw kdyh ehhq lqvwuxphqwdo wr exlog xs pruh srolwlfdo fdslwdo1 Vlplodu dqhfgrwlfdo hylghqfh frxog eh irxqg lq rwkhu HUEV odxqfkhg vrrq diwhu hohfwlrqv lq Shux/ Lvudho dqg Lfhodqg1 65 Table 10 - Regression Model using Interactions with Distance ERBS log (Months to Next Elections) -3.689 *** (0.88) log (Months to Next Elections) * Reserves 5.217 ** (2.62) log (Months to Next Elections) * Openness 0.925 * (0.51) log (Months to Next Elections) * Pol. Fragmentation 0.787 *** (0.23) Growth 18.621 (33.13) Constant 7.28 *** (2.48) Prob > Chi2 0.0013 Pseudo R2 0.6403 Observations 33 Robust standard errors in parentheses * significant at 10%; ** significant at 5%; *** significant at 1% Doo wkh frh!flhqwv lq wkh uhjuhvvlrq duh vwdwlvwlfdoo| vljql fdqw zlwk wkh h{fhswlrq ri jurzwk1 Wkh vljq ri wkh gl huhqw frh!flhqwv frq up wkh lqwxlwlrq ghulyhg iurp wkh slfwxuhv deryh1 Lq sduwlfxodu/iru d jlyhq glvwdqfh wr qh{w hohfwlrqv d juhdwhu ohyho ri lqwhuqdwlrqdo uhvhuyhv/rshqhvv dqg srolwlfdo iudjphqwdwlrq lqfuhdvhv wkh suredelolw| ri dgrswlrq ri dq HUEV1 Wkh h{dpsohv phqwlrqhg lq wklv vhfwlrq khos wr udwlrqdol}h dq revhuyhg idfw zklfk dsshduv wr eh lqfrqvlvwhqw zlwk srolwlfdo rssruwxqlvp/qdpho| wkh h{lvwhqfh ri HUEV odxqfkhg vrrq diwhu hohfwlrqv1 Wkh errp0exvw f|fohv* k|srwkhvlv zrxog kdyh suhglfwhg wkdw wkh rswlpdo wlplqj iru wkh HUEV vkrxog kdyh ehhq ixuwkhu dzd| iurp sdvw dqg forvhu wr qh{w hohfwlrqv1 Qrqhwkhohvv/wkh prgho vxjjhvwv wkdw wkh ghwhuplqdwlrq ri wkh qrplqdo dqfkru lq wkhvh fdvhv zdv frqglwlrqhg e| rqh ru pruh ri wkh prgho*v gl huhqw h{sodqdwru| yduldeohv1 Lq idfw/d edvholqh suredelolw| whvw frq upv wkdw wkh prgho suhglfwv fruuhfwo| ryhu <3( ri wkh dfwxdo HUEV dqg PEV lq wkh gl huhqw frxqwulhv ri wkh vdpsoh15; 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