Welcome!
I am Jonathan Federle, a Postdoctoral Researcher at the Kiel Institute for the World Economy. I will be visiting Harvard Business School between April and May 2026.
I am an applied economist with research interests in empirical macroeconomics, finance, and economic history.
Contact: jonathan.federle@ifw-kiel.de | LinkedIn | CV
Does Money Win Wars? (with Dominic Rohner and Moritz Schularick)
The impact of economic resources on the outcomes of military conflicts is heatedly debated—yet causal empirical evidence is lacking. To address this gap, the current 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 financial windfalls on winning chances in interstate conflicts. We find a statistically significant and quantitatively large impact of windfalls on winning odds and show that a key channel of transmission is a surge in military spending.
Wars, Threats, and the Sovereign Bond Market (with Robin Greenwood, Josefin Meyer, Carmen Reinhart, and Christoph Trebesch)
To be presented at the RFS-GCAP-GSB special-issue conference
We study how wars and explicit military threats affect financial markets worldwide. We leverage 250,000 monthly price observations on sovereign bonds back to 1822 to create a new long-run external currency bond index for up to 90 countries-the EXBI. We combine the EXBI with new data on wars and document large effects of conflict risk on investor returns and sovereign borrowing costs. In a global external bond portfolio, a one-standard-deviation war shock lowers investor returns by about five percentage points within a year. At the country level, wars at home generate sharp investor losses and increase sovereign default risk. Also war threats move financial markets. They depress bond prices in threatened states, but not in threatening ones. These results show that conflict risk, both realized and anticipated, is a systematic driver of sovereign debt markets and that war threats are a channel for geoeconomic coercion.
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 specific 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.
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.
The Price of War (with André Meier, Gernot J. Müller, Willi Mutschler, and Moritz Schularick)
American Economic Review 116 (3): 791–827, 2026
We assemble a new data set spanning 150 years and 60 countries to study the economic toll of war. A war of average intensity is associated with an output drop of close to 10 percent in the war-site economy, while consumer prices rise by approximately 20 percent. The capital stock, total factor productivity, and equity returns all decline sharply. The economic ramifications of war are not confined to the war site. The evidence points to adverse economic outcomes in other belligerent and third-party countries if they are exposed to the war site through trade linkages or share a common border.
Publication - Working paper - Policy brief - Price of War Calculator - Presentation - VoxEU
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 58 (3): 681-703, 2026
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 Spending 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.
The Effects of War on Market Functioning (with Luca Galati and Ryan Riordan)
We study how an interstate war affects equity market functioning using the Russian invasion of Ukraine as a precisely timed shock. Using millisecond-level trades and quotes, we show that liquidity deteriorates sharply and disproportionately for firms headquartered closer to the conflict. Markets do not anticipate the exact timing of the invasion: abnormal quoted spreads for nearby and distant firms are near zero in the closing hours of the days before, but at the market open following the invasion, quoted spreads for nearby firms jump by about 6.6 standard deviations. In difference-in-differences estimates, first-degree neighbors experience higher quoted and effective spreads, and trading activity. Continuous distance measures show even larger effects, with spreads increasing by 16-24 bp and trading intensity by 25-37% for more exposed firms. By contrast, war-induced price changes and firm-specific volatility explain little of the liquidity response.
Working paper available on request