Research

Research:
Crude oil price movements greatly impact airlines, utilities, homeowners, automobile firms, central banks, and even climate change advocates. As a result academics have proposed many models to predict the evolution its future price. The main models proposed are based on either observable macroeconomic indicators or unobservable statistical factors. Fearghal considers both types and utilises them in parallel with a CFTC Commitment of Traders report, to provide a proxy of speculative participation in oil markets.

Outcome:
Despite both types of models showing relatively similar performance in terms of predicting the evolution of oil prices, Fearghal finds that an increased presence of speculative investors leads to the link between the traditional macroeconomic indicators and oil prices breaking down. Fearghal has co-authored a research article on the topic with a collaborator from the University of Leeds. Their work was published in the Economics Letters journal.

Currently we have focused on an episode in India in the period after independence in 1947. The Indian government introduced a range of policies known as ‘Indianization’ which sought to increase the number of Indian nationals in senior management roles, and to increase the proportion of equity owned by Indians in foreign firms. While economic policies focused on industrial development through import substitution utilising tariffs, duties and capital controls. These policies restricted how and where foreign firms could operate in the Indian economy. 

Our research analyses the strategic responses of British firms to these developments. Many had a long history of operations in India, with significant levels of Foreign Direct Investment in diverse industries. Using a range of historical data and sources the research identifies long-run trends in the ownership, management and operations of these firms. The findings show that three common strategies were followed: managed exit, compliance or negotiation. Factors that affecting the firms’ decisions were the nature of the industry and outlook for future intervention, and the depth of relationships with Indian business and government interests. Historical study of such episodes improves understanding of the effects of policy changes on foreign investment, and can help managers to identify survival strategies when markets become hostile.

Research: Arcangelo Dimico, in collaboration with Alessia Isopi (University of Manchester) and Ola Olson (University of Gothenburg) consider the impact that an external surge in the demand for lemons in the 19^th century has had on the consolidation and growth of the Sicilian Mafia. This external surge in the demand of lemons occurred after the discovery of the effective use of citrus fruits to prevent scurvy by James Lind. As a result, the Sick and Hurt Commission agreed to supply all naval ships on Foreign Service with lemon juice. Given Sicily’s already dominant position in the international market for citrus fruits, the increase in demand resulted in a very large inflow of revenues to citrus-producing towns during the 1800s. The combination of high profits, a weak rule of law, a low level of interpersonal trust, and a high level of local poverty made lemon producers a suitable target for predation. The hypothesis is tested using data from the Damiani Inquiry (a parliamentary inquiry conducted between 1881–1886) which represents one of the earliest sources about the economic and social conditions of Sicily in the 1880s. Using this data, Arcangelo and co-authors show that mafia presence in the 1880s is strongly associated with the prevalence of citrus cultivation and no other crop or industry has a robust impact on mafia activity.

Outcome: The development of the Mafia in Sicily has often been considered as the consequence of institutional absence which allowed a private organization to provide a typical public good. This study differs from other works because emphasizes the importance of an exogenous shock in the international demand (specifically lemons) which combined with the general political insecurity and weak rule of law, provided an ideal breeding ground for the emergence of a mafia. The paper has now been published, following peer review, in the Journal of Economics History.