The effect of populism on macroeconomic performance

• Thesis title in Czech: Vliv populismu na makroekonomickou výkonnost
• Thesis title in English: The effect of populism on macroeconomic performance
• Academic year of topic announcement: 2022/2023
• Thesis type: diploma thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: PhDr. Jaromír Baxa, Ph.D.
• Author: hidden - assigned by the advisor
• Date of registration: 28.06.2023
• Date of assignment: 28.06.2023

Guidelines

Motivation:
In recent years, the rise of populism has captured the attention of both academics and policymakers worldwide. Populist movements and leaders have gained significant prominence in various countries, challenging established political systems and shaping the socio-economic landscape. While populism's impact on political dynamics has been widely examined, its implications for macroeconomic conditions and long-term progress remain an area that requires further investigation. Understanding the relationship between populism and a country's economic trajectory is crucial for policymakers and researchers alike, as it sheds light on the potential consequences of populist policies and informs the design of effective economic frameworks.

The motivation behind this thesis stems from the need to comprehensively explore how populism influences a country's future macroeconomic situation and progress. By examining the interplay between populist movements and economic policies, we can gain insights into the potential drivers, mechanisms, and implications of populism on key macroeconomic indicators such as growth, inflation, employment, income distribution, and fiscal stability. Such an analysis holds immense importance in a world characterized by increasing political polarization and the resurgence of populist narratives.

Hypotheses:
1. Hypothesis #1: Countries with a higher prevalence of populist movements or leaders will experience lower economic growth rates compared to countries with lower levels of populism.
2. Hypothesis #2: Higher levels of populism will be associated with increased income inequality within a country, as populist policies often prioritize short-term benefits for certain segments of the population at the expense of long-term inclusive growth.
3. Hypothesis #3: Populist rhetoric and policies that undermine the independence of central banks and the rule of law will have adverse effects on investor confidence, resulting in higher borrowing costs and reduced foreign direct investment inflows.

Expected Contribution:
The thesis would contribute to the existing academic literature by deepening our understanding of the complex relationship between populism and macroeconomics. It would provide empirical evidence, theoretical insights, and rigorous analysis, helping to fill gaps in knowledge and offering new perspectives on this topic.

The thesis could have practical implications for policymakers and stakeholders. By investigating the economic consequences of populism, the research findings could inform policy debates and decision-making processes. It may highlight the potential risks and challenges associated with populist policies and offer insights into designing more effective economic frameworks and policy strategies.

References

Core Bibliography:
GURIEV, Sergei a Elias PAPAIOANNOU. The Political Economy of Populism. Journal of Economic Literature [online]. 2022, 60(3), 753-832. ISSN 00220515. doi:10.1257/jel.20201595

Rodrik, D. (2018). Is Populism Necessarily Bad Economics? AEA Papers and Proceedings, 108, 196–199. https://www.jstor.org/stable/26452731

Acemoglu, D., Egorov, G., & Sonin, K. (2013). A POLITICAL THEORY OF POPULISM. The Quarterly Journal of Economics, 128(2), 771–805. https://www.jstor.org/stable/26372511

Dornbusch, Rudiger, and Sebastian Edwards. 1991. The Macroeconomics of Populism in Latin America. Chicago: University of Chicago Press.

Luiz Carlos Bresser Pereira. (1991). Populism and Economic Policy in Brazil. Journal of Interamerican Studies and World Affairs, 33(2), 1–21. https://doi.org/10.2307/165829

Huntington, S.P. 1991. Democracy’s third wave. Journal of Democracy 2 (2): 12–34

Bagchi, S. and M.J. Fagerstrom. 2019. Wealth inequality and democracy. Annual
Conference on Taxation and Minutes of the Annual Meeting of the National Tax
Association 112: 1–40

Ansell, B. and D. Samuels. 2010. Inequality and democratization: A contractarian
approach. Comparative Political Studies 43 (12): 1543–1574

Muller, E.N. 1988. Democracy, economic development, and income inequality.
American Sociological Review 53 (5): 50–68

Preliminary scope of work

Methodology:
Data:
To gather data on the prevalence of populism within different countries, I could use established indices that measure populism, such as from The Manifesto Project. The Chapel Hill Expert Survey could also be a great resource.
A second way would be to analyse public speeches or social media data (such as Twitter) to identify populist rhetoric and sentiment. Web scraping tools and natural language processing techniques could be then used to work with the data.

Economic growth data can be obtained from sources like the World Bank's World Development Indicators database, which provides annual GDP growth rates. The World Income Inequality Database provides comprehensive data on income inequality metrics, such as the Gini coefficient, for a wide range of countries. To measure investor confidence, I could examine interest rates or government bond yields as proxies for borrowing costs. Data on interest rates can be obtained from central bank websites or financial data providers. Foreign direct investment inflow data can be sourced from the World Bank.

I would then conduct statistical analysis best suited to the data gathered.

Outline:
1. Introduction
Background and context of populism and its rise in various countries.
Statement of the research problem and objectives.
Significance and relevance of studying the relationship between populism and macroeconomics.

2. Literature Review
Review of existing literature on populism, its drivers and consequences.
Synthesis of previous research on the relationship between populism and macroeconomic indicators, such as growth, inequality, fiscal stability, and trade.

3. Theoretical Framework
Development of a conceptual framework that explains the potential mechanisms through which populism can influence macroeconomic outcomes.

4. Methodology
Explanation of statistical or econometric techniques employed to test the hypotheses.
Consideration of potential limitations and strategies to address them.

5. Empirical Analysis
Testing of the hypotheses using appropriate statistical techniques.
Interpretation and discussion of the empirical results in relation to the research questions and theoretical framework.

6. Findings and Discussion
Summary of the main findings from the empirical analysis.
Discussion of the implications of the findings for understanding the relationship between populism and macroeconomic outcomes.
Comparison with existing literature and interpretation of any inconsistencies or novel insights.

7. Conclusion
Recapitulation of the research objectives and main findings.
Reflection on the limitations and potential avenues for future research.
Final remarks and concluding thoughts.

8. References

9. Appendices