Riots, Battles and Cycles
This paper proposes a conceptual framework to investigate the impact of military conflicts on business cycles, as well as defense policies through enrolment mechanisms. Our framework is a variation of a Real Business Cycle model first proposed by Hercowitz and Sampson (1991) that admits explicit solutions. We extend and estimate the initial model on US data to account for specific shocks that destroy the stock of capital and that may be as large as desired. We consider two types of dynamics on the depreciation rate of capital: short-term shocks, that may be interpreted as riots and captured by a Moving Average specification, and mid-term shocks, that may be interpreted as wars and captured by a Markov Switching process. Destructions may be limited by publicly decided enrolment, which allows to question the goals defense policies should aim at. First our model reproduces usual business cycle facts. Second, it allows to characterize the macroeconomic dynamics after shocks on the depreciation rate of capital. Finally, it provides a simple framework to quantify the welfare effects of alternative (simple) defense technologies.
|Date of creation:||10 Jan 2009|
|Date of revision:||05 Apr 2009|
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- Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008.
"Civil Wars and International Trade,"
Journal of the European Economic Association,
MIT Press, vol. 6(2-3), pages 541-550, 04-05.
- Martin, Philippe & Mayer, Thierry & Thoenig, Mathias, 2008. "Civil Wars and International Trade," CEPR Discussion Papers 6659, C.E.P.R. Discussion Papers.
- Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Civil Wars and International Trade," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00293024, HAL.
- Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Civil Wars and International Trade," Post-Print hal-01022359, HAL.
- Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Civil Wars and International Trade," Sciences Po publications info:hdl:2441/10149, Sciences Po.
- Ohanian, Lee E, 1997. "The Macroeconomic Effects of War Finance in the United States: World War II and the Korean War," American Economic Review, American Economic Association, vol. 87(1), pages 23-40, March.
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- Gregory D. Hess, 2003. "The Economic Welfare Cost of Conflict: An Empirical Assessment," CESifo Working Paper Series 852, CESifo Group Munich.
- Ellen R. M cG rattan & Lee E. Ohanian, 2010. "Does Neoclassical Theory Account For The Effects Of Big Fiscal Shocks? Evidence From World War Ii," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 509-532, 05.
- Ellen R. McGrattan & Lee E. Ohanian, 2006. "Does Neoclassical Theory Account for the Effects of Big Fiscal Shocks? Evidence From World War II," NBER Working Papers 12130, National Bureau of Economic Research, Inc.
- Ellen R. McGrattan & Lee E. Ohanian, 2008. "Does neoclassical theory account for the effects of big fiscal shocks? Evidence from World War II," Staff Report 315, Federal Reserve Bank of Minneapolis.
- Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade Not War?," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 865-900.
- Martin, Philippe & Mayer, Thierry & Thoenig, Mathias, 2005. "Make Trade not War?," CEPR Discussion Papers 5218, C.E.P.R. Discussion Papers.
- Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade not War?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00293018, HAL.
- Martin, Philippe & Mayer, Thierry & Thoenig, Mathias, 2005. "Make trade not war ?," CEPREMAP Working Papers (Docweb) 0515, CEPREMAP.
- Francq, C. & Zakoian, J. -M., 2001. "Stationarity of multivariate Markov-switching ARMA models," Journal of Econometrics, Elsevier, vol. 102(2), pages 339-364, June.
- Christian Francq & Jean-Michel Zakoïan, 2000. "Stationarity of Multivariate Markov-Switching ARMA Models," Working Papers 2000-32, Centre de Recherche en Economie et Statistique.
- Baxter, Marianne & King, Robert G, 1993. "Fiscal Policy in General Equilibrium," American Economic Review, American Economic Association, vol. 83(3), pages 315-334, June.
- King, R.G. & Baxter, M., 1990. "Fiscal Policy In General Equilibrium," RCER Working Papers 244, University of Rochester - Center for Economic Research (RCER).
- Arias Andrés F. & Laura Ardila, 2003. "Military Expenditure and Economic Activity: The Colombian Case," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, September. Full references (including those not matched with items on IDEAS)
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