Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
I investigate the macroeconomic effects of political risk caused by conflict among politicians in a proxy VAR. Using an external instrument based on an index of US partisan conflict for identification, I find that reduced political risk has an expansionary impact: it is immediately priced into stock prices, firms start taking more risk, it increases firms’ dividend payouts, debt issuance and credit use — ultimately output rises.