Research in International & Political Macroeconomics

Business Cycles with Revolutions
(What happens to business cycles after revolutions? Both empirical VAR and theoretical DSGE model.)
[early draft] [presentation]

with Lance Kent

Abstract. This paper attempts to address one question, both empirically and theoretically: What are the impacts of political revolutions on the business cycles of developing countries? Empirically, we find that the emergence from a revolution amounts to a shock that results in permanent increases in the level of real output, real investment and capital inflows. Taken together, our estimated VAR shows that following the first protests to overthrow the government, the average economy gets worse before it gets better. We then build a simple DSGE model with equilibrium revolutions. We embed a political economy game between two players (the people and the ruling elites) in a real business cycle model of a small open economy. Our model can replicate business cycles that are qualitatively consistent with our empirical finding that the economy gets worse before it gets better.

Growth & Revolutions
(What happens to long-term growth after revolutions? Theory.)
[early draft] [presentation]

with Lance Kent
Abstract. We build a growth model with endogenous political revolutions. Initially, a dynasty of incompetent autocrats rules the country. As the stock of human capital in the population grows, employment opportunities remain scarce because incompetent autocrats fail to provide good economic institutions. Thus, political transitions are inevitable in the long run. We show that there are revolutions in equilibrium, and revolutions change the growth path significantly. Consistent with empirical evidence of democratic transitions, revolutions in our model hurt growth and increase macroeconomic volatility in the short run, but by removing rent-seeking autocrats, revolutions will eventually shift growth to a better steady state.

Simulated growth path with endogenous revolutions

Protest and Repression: a Model of the Arab Spring

(Why did the Arab Spring turn out differently across countries? Theory and some empirics.)
[early draft] [presentation]

with Lance Kent
Abstract. What common factors caused the recent popular protests in the Arab World? And what factors explain their different outcomes: the autocrats in Tunisia and Egypt abdicated, those in Libya and Syria waged a civil war, while the Saudi Arabia saw only limited protests? This paper develops a tractable model of the Arab Spring as a game between a country's autocrat and its people. Our model predicts an endogenous probability for each equilibrium outcome (abdication, civil war and status quo) based on a set of economic, demographic and political fundamentals. Our model generate testable predictions on these probabilities and thus provide our answers to the two questions above. We then provide suggestive evidence for our theory based on case studies and a preliminary regression on panel data on the Middle East and North Africa.

Non-technical presentation summarizing our works on revolutions

Sovereign Debt Cycles (Job Market Paper) [draft] [code]
Awarded Best Research Paper, Vietnam Economist Annual Meeting, 2011

Abstract. Why are governments able to repeatedly issue positive sovereign debt, default on it, and then borrow again? This paper explores one possible answer to this question based on an information transmission mechanism that links defaults and settlements to the private sector economy. I develop a stochastic dynamic model of a small open economy that embeds a signaling game to capture this information transmission. In equilibrium, a government repays new debt or settles old debt in order to send a positive signal about the domestic economy to foreign investors. The model generates equilibrium cycles of defaults and settlements, endogenous creditor losses (or haircuts) and an endogenous information spillover from these defaults and settlements to the private sector's business cycles. When calibrated to an emerging market economy, the information spillover can account for empirically reasonable levels of sovereign debt.

Endogenous Perceptions of Climate Change
[early draft]

with Manh-Hung Nguyen
Abstract. We build a simple general equilibrium, political economy model with environmental externality. Our model has a novel feature: citizens are uncertain about the impact of economic activities on the quality of the environment. Thus, they are uncertain about the gain of a tax policy that curbs pollution. We show that, in equilibrium, the fraction of population voting in favor of a pollution tax is decreasing in the spread of public opinion about anthropogenic environmental impact. Therefore, vested interest groups from the polluting industry have an incentive to amplify the public's uncertainty, by running campaigns to discredit environmental science. This is consistent with historical findings in Oreskes and Conway (2010) about the “merchants of doubt”.

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In Progress (working papers coming soon)

Calculating the Cost of Climate Change Ignorance

with Ricardo Colacito

Political Costs of Sovereign Default: Evidence and Theory

with Igor Livshits

Unrest & Business Cycles with Fat Tails

with Lance Kent

Growth & Unrest in China

with Lance Kent

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Previous Finished Works

PhD Dissertation: Essays on Sovereign Debt [pdf]

Committee: Martin Eichenbaum (chair), Lawrence Christiano, Matthias Doepke, Alessandro Pavan

Roots of the derivative of the Riemann-zeta function and of characteristic polynomials [pdf]

Eduardo Dueñez, David W Farmer, Sara Froehlich, C P Hughes, Francesco Mezzadri and Toan Phan
Nonlinearity, vol 23, number 10, IOP Publishing 2010

Social vulnerability to climate change in Cambodia, Lao PDR and Vietnam [link]

Nguyen Huu Ninh, Luong Quang Huy, Philip Michael Kelly and Toan Phan
"Sustainable Development: Asia-Pacific Perspectives", Cambridge University Press, Jan 2012