Temper and Temperature: The Missing Link of Climate on Armed Conflicts

We investigate the causes of a conflict by adding ambient climate factors to the existing bundle of most significant variables. It turns out that – controlling for possible associations – temperature could actually induce a conflict. We emphasise that temperature could not be a dominant reason in starting a conflict; however, it could escalate the chances when other factors are present. This paper references some of the related psychological studies to support this claim. We also show that grievance factors could actually be rightfully effective in starting an internal conflict alongside greed based reasons. In the end, we believe that it could be informative to study ambient factors more often in economics.

Co-movements in Real Effective Exchange Rates: Evidence from the Dynamic Hierarchical Factor Model

We analyze and quantify co-movements in real effective exchange rates while considering the regional location of countries. More specifically, using the dynamic hierarchical factor model (Moench et al. (2011)), we decompose exchange rate movements into several latent components; worldwide and two regional factors as well as country-specific elements. Then, we provide evidence that the worldwide common factor is closely related to monetary policies in large advanced countries while regional common factors tend to be captured by those in the rest of the countries in a region. However, a substantial proportion of the variation in the real exchange rates is reported to be country-specific; even in Europe country-specific movements exceed worldwide and regional common factors.