Welcome!
I am Jonathan Federle, a Postdoctoral Researcher at the Kiel Institute for the World Economy.
I am an applied economist with research interests in empirical macroeconomics, finance, and economic history. My research agenda largely revolves around topics at the intersection of geopolitics and macroeconomics.
Contact: jonathan.federle@ifw-kiel.de | LinkedIn | CV
The Price of War (with André Meier, Gernot J. Müller, Willi Mutschler, and Moritz Schularick)
Conditionally accepted at the American Economic Review
We assemble a new data set spanning more than 150 years and 60 countries to study the economic impact of interstate war. The economic costs of war are not confined to the war site, where output on average declines by 20 percent and inflation increases persistently by almost 10 percentage points. There are strong spillovers to nearby countries which decline with geographic distance - both for belligerent and third countries. We rationalize these patterns in an international business cycle model: As war destroys the productive capacity of the war site, trade with nearby economies collapses, generating an endogenous supply-side contraction abroad.
Working paper - Policy brief - Price of War Calculator - Presentation - VoxEU
Who Wins Wars? (with Dominic Rohner and Moritz Schularick)
Economic resources are often seen as decisive for the outcomes of military conflicts. This paper asks whether "deeper pockets" help win wars. We construct a fine-grained dataset covering more than 700 interstate disputes and rely on exogenous resource price shocks to estimate the causal effect of windfall gains on winning chances in interstate conflicts. We find a statistically significant and quantitatively large impact of windfall gains on winning odds and show that a key channel of transmission is a surge in military spending, after an exogenous increase in government revenues.
How Wars Create Winners and Losers in the Global Economy
Wars create winners and losers in the global economy. Using data on 49 interstate wars from 1962–2023, I trace spillovers to third countries via the terms of trade. When warring countries are dominant suppliers of products, global market prices of these products rise. Third countries importing these products suffer lower output and higher inflation, while countries exporting these products boom. A 1-standard-deviation war shock on the export basket lifts output by 1 percent. The same shock on import baskets reduces output by 2 percent. The results exist over and above direct trade channels and extend beyond energy-supply shocks.
Working paper available on request
Inflation Surprises and Election Outcomes (with Cathrin Mohr and Moritz Schularick)
We study the political consequences of inflation surprises, focusing on votes for extremist and populist parties in 365 elections in 18 advanced economies since 1948. Inflation surprises are regularly followed by a substantial increase in vote shares of extremist, anti-system, and populist parties. An inflation surprise of 10 percentage points leads to a 15% increase in their vote share, comparable to the increase typically seen after financial crises. We show that the change in voting behavior is particularly pronounced when real wages decline, and less evident when real wages are not affected. Our paper points to considerable political after-effects of unexpected inflation.
Proximity to War: The Stock Market Response to the Russian Invasion of Ukraine (with André Meier, Gernot J. Müller, and Victor Sehn)
Journal of Money, Credit and Banking (forthcoming)
We identify a "proximity penalty" in the stock market response to the Russian invasion of Ukraine: the closer countries are to Ukraine, the lower their equity returns in a four-week window around the start of the war. Strikingly, this result holds even at the firm level within countries. Trade linkages explain two thirds of the proximity penalty. We attribute the remainder - 1.1 percentage points in equity returns per 1,000 kilometers of extra distance - to military disaster risk. Evidence from other financial data, geopolitical risk indicators and aid flow statistics supports the relevance of military tail risk as a spillover channel.
The Military Taylor Rule (with Mathias Thoenig and Christoph Trebesch)
We propose a model-based "Military Taylor Rule" - a simple policy rule to determine the optimal level of military spending given foreign threats and war risks. In our model, countries adjust their defense expenditures in response to changing probabilities of war, driven in particular by the military spending of allies and rivals within their geopolitical network. We test the model's predictions using a long-run dataset on military expenditures, alliances, and rivalries for 60 countries over 150 years. Analogous to the Taylor rule in monetary policy, we find that a small set of observables - domestic GDP, and the military spending of allies and rivals - explains most of the cross-country and intertemporal variation in defense spending. To address endogeneity in the military spending of allies and rivals, we exploit exogenous trade windfalls and losses in the network driven by global price shocks. Our results show that governments respond strongly to military buildups by rival countries, but only weakly to reductions in allied spending, consistent with deterrence motives. Higher domestic GDP is associated with greater defense spending, reflecting both stronger fiscal capacity and the larger economic stakes it seeks to defend.
Financial Market Reactions to Patent Disclosures and Grants (with Ann-Christin Kreyer and Dietmar Harhoff)
We propose major amendments to a popular approach for retrieving valuations for U.S. patents from stock market data. We modify the model developed by Kogan et al. (2017) in two important ways. For most firms, especially since the 1980s, grant events involve multiple, simultaneously issued patents. We argue that the number of simultaneously issued patents affects the signal-to-noise ratio used for filtering patent value estimates out of adjusted market returns. Assuming a constant SNR leads to biases that are correlated with firm size and may change over time. We also propose a novel method for allocating the firm's capital gain from a week's multiple patent grants to individual patents. We discuss possible implications of these corrections for a variety of use cases and studies that have been conducted using KPSS value estimates.
Spatial Disaster Risk (with Luca Galati and Ryan Riordan)
Examining violent conflicts since 1991, we find spillovers in disaster risks stress equity prices of firms headquartered in uninvolved but geographically exposed countries. Being neighbor to conflict is associated with negative returns of 1.49 percentage points on impact. This is attenuated by 0.21 percentage points per 1,000 kilometers of distance from the disaster site. The relationship holds within countries and is robust to controlling for trade and international linkages. Option-implied risk reversals reveal market concerns regarding pronounced downturns consistent with heightened disaster risk straining asset prices nearby disaster sites. Besides, we document sizable pricing effects of conflict-induced trade disruptions.
Working paper available on request