Project Details
Projekt
Municipalities and their Expectations on Pay-Offs of Swap Deals
Applicant
Professorin Dr. Christine Trampusch
Subject Area
Political Science
Economic and Social History
Economic and Social History
Term
from 2015 to 2020
Project identifier
Deutsche Forschungsgemeinschaft (DFG) - Project number 275362433
Over the past decades the use of swaps to cope with interest-rate and currency-rate risks has grown tremendously in the debt management of local governments. In many cases, this has been accompanied by disastrous losses on the part of municipalities. While these swap activities are heavily debated in courts and the press, they remain a blind spot in the scholarly literature. Through comparative case studies of swap activities of municipalities in the U.S., U.K., and Germany between the early 1980s and 2014 this project seeks to explore systematically the expectations city treasurers have regarding the outcomes of swaps and how these expectations have changed over time. In detail, this project seeks to answer three research questions: (1) Which expectations do local treasurers have regarding the utilisation of swaps? (2) What shapes the expectations of public treasurers regarding the outcomes of swaps? (3) How do crises such as swap losses affect the process of forming expectations? These three research questions refer to the three big topics formulated in the DFG-Priority Programme Experiences and Expectations: Historical Foundations of Economic Behaviour: (1) the change of economic expectations; (2) the importance of historical experiences for economic expectations; (3) the role of crises for changing expectations. The case studies of this project follow the most different system design, the method of agreement, and applies the within-case methods of content analysis, interviews, and the method of process tracing. The most different system design allows us to control for the effects of the fiscal, political, and legal context. This project has three main objectives: (1) Building upon insights of behavioral economics, economic sociology, and political science, the project analyses the role of cognitive mechanisms, financial professions, and historical experiences in shaping expectations. It thereby refines and tests hypotheses on the formation and change of expectations under the condition of uncertainty. (2) The project generates a cross-national database on local treasurers expectations of swap deals, the real gains and losses of these activities as well as their fiscal, political, and legal context. (3) It develops the measurement of expectations by using various data sources such as court cases, the financial press, surveys, and interviews. The project will generate the following products: a database on expectations, real gains and losses, and the fiscal, political and legal context of local swap deals in the U.S., the U.K., and Germany, one book (Ph.D.), and three articles to be published in international journals. The insights generated through this project promise to demonstrate not only a valuable contribution to the DFG-Priority Programme, but also to the discussion about the changing state-financial-market relationship.
DFG Programme
Priority Programmes
