Our objective is to engage in innovative research that extends the frontiers of the discipline, deepening our understanding of the operation of modern economies. Research spans almost all the major sub-fields of economics with particular strengths in microeconomic theory, including behavioural economics; econometrics, both micro-econometrics and time series; economic history and development and international economics.

The University of Oxford is ranked 8th in the world and 2nd in Europe in the most recent Tilburg University ranking of Economics departments, based on research contribution for the period between 2012-2016.

In the most recent Research Excellence Framework (REF 2014) to evaluate the research output of UK Universities, Oxford was first in overall research strength in Economics and Econometrics, with more research ranked as ‘world-leading’ than any other participating institution. In a submission of 84 FTE academics, 56% of our research was rated as ‘world-leading’ (4*) and a further 33% rated as ‘internationally excellent’ (3*).

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As one of Europe’s leading Economics departments, Oxford aims to inform and improve the development and implementation of economic and public policy in the UK and around the world. We do this by producing innovative research that extends the frontiers of the discipline and deepens our understanding of the operation of modern economies.

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Working Papers

Authors: John Knight, Bianjing Ma, Ramani Gunatilaka

Jan 2020

With economic development can come social, attitudinal and cultural change, for good or ill or both We pose an unexplored question: why has happiness fallen in rural China whereas rural income has risen rapidly? Two rich data sets are analysed, the rural surveys of the China Household Income Project (CHIP) relating to 2002 and 2013. Our main methods are happiness regressions and decomposition methodology. Several approaches are adopted and no fewer than ten hypotheses are tested. One approach is to examine the variables that are found to be important in happiness functions and to consider their contributions to the fall in the mean happiness score of rural people. Another approach is to analyse the effect on rural happiness of the vast rural-urban migration that took place over this period. This is followed up by introducing tests of the role that changing attitudes might have played.

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Authors: David Hendry, , Jennifer Castle

Jan 2020

We investigate past climate variability over the Ice Ages, where a simultaneous-equations system is developed to characterize land ice volume, temperature and atmospheric CO2 levels as non-linear functions of measures of the Earth’s orbital path round the Sun. Although the orbital variables were first theorised as the fundamental causes of glacial variation by Croll in 1875 following Agassiz’s conception of a ‘Great Ice Age’ in 1840, their minor variations were thought insufficient to drive such major changes, especially the relative rapidity of shifts between glacial and warmer periods. The changes over the ice ages in atmospheric CO2 closely matched changes in land ice volumes, and since temperature changes are in turn affected by CO2 and also closely tracked ice volumes, a key identification issue is the causal role of CO2 in the process. As any links between CO2 and temperature above the forces from the orbital drivers (which of course are still operating) must have been natural ones hundreds of thousands of years ago, understanding their interactions at that time is important now that additional CO2 emissions are anthropogenic. We develop a simultaneous equation system over the last 800,000 years that allows a test of the role of CO2 as endogenously driven by the orbital variations, or an ‘exogenous’ influence as it now is.

JEL Codes: C01, C51, C87, Q54

Keywords: Climate Econometrics; Model Selection; Outliers; Identification; Saturation Estimation; Au- tometrics; Ice Ages

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Authors: Anthony Venables, Julia Bird, Mathilde Lebrand

Jan 2020

This paper develops a computable spatial equilibrium model of Central Asia and uses it to analyze the possible effects of the Belt and Road Initiative on the economy of the region. The model captures international and subnational economic units and their connectivity to each other and the rest of the world. Aggregate real income gains from the Belt Road Initiative range from less than 2 percent of regional income if adjustment mechanisms take the form of conventional Armington and monopolistic competition, to around 3 percent if there are localization economies of scale and labor mobility. In the latter case, there are sizeable geographical variations in impact, with some areas developing clusters of economic activity with income increases of as much as 12 percent and a doubling of local populations, while other areas stagnate or even decline.

JEL Codes: F12, F15, R11, R13

Keywords: regional integration, transport infrastructure, spatial modeling, economic geography, Central Asia.

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Authors: Martin Ellison, Sang Seok Lee. Kevin Hjortshøj O’Rourke

Jan 2020

How did countries recover from the Great Depression? In this paper we explore the argument that leaving the gold standard helped by boosting inflationary expectations and lowering real interest rates. We do so for a sample of 30 countries, using modern nowcasting methods and a new dataset containing more than 230,000 monthly and quarterly observations for over 1,500 variables. In those cases where the departure from gold happened on clearly defined dates, it seems clear that inflationary expectations rose in the wake of departure. Synthetic matching techniques suggest that the relationship is causal.

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Authors: Sebastian Alvarez

Jan 2020

The recent international financial crisis has dramatically revealed the shortcomings and potential dangers of bank globalization and deeper financial integration. While the lack of supervision and adequate legal frameworks has been largely acknowledged as a main problem, the effects of regulation on the development of international banking activity and financial stability are still a matter of controversy. This article investigates the conditions under which the globalization of the domestic banking sector unfolded in Brazil and Mexico during the years of dizzying expansion of foreign finance that culminated the international debt crisis of 1982. It shows how the regulatory framework for international banking and foreign capital in Brazil created a model of intermediation that was considerably less vulnerable to crisis than in Mexico, with a more lightly regulated institutional base. These findings provide insights into historical discussions about the implications of financial regulation and capital controls for the development and expansion of foreign finance and whether the risks underlying international banking are necessarily inherent to the process of financial globalization.

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