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Paul Armstrong-Taylor

HNC Resident Professor of International Economics


Before coming to Nanjing in September 2010, Dr. Armstrong-Taylor was a Visiting Professor of Economics and Finance at the Antai School of Economics and Management, Shanghai Jiaotong University.
Previously, he worked as an investment banker at Morgan Stanley in London, as an economic consultant for London Economics in London and as a management consultant for Monitor Group in Cambridge, MA.  
Professor Armstrong-Taylor received his BA and MPhil in Economics from Cambridge University, and his PhD in Economics from Harvard University. 
Research and Publications:
Dr. Armstrong-Taylor’s research and teaching interests include applied game theory, business strategy and finance. His PhD thesis Strategic Credibility investigated how the propensity of politicians to falsely deny involvement in a scandal varies with their popularity.

Why do politicians lie?

When do politicians lie? A politician who admits to wrongdoing will likely suffer some loss of popularity, but probably not as great as if he denied wrong doing and was subsequently discovered to have lied. This simple observation has a number of implications. For example, a politician in a marginal seat may have little choice but to risk lying as admitting will lose him too much popularity to survive. On the other hand, a politician in a relatively safe seat might survive the loss from admitting, but not from lying and being caught. Therefore we might predict the likelihood that a politician admits to a scandal to be positively related (over some range at least) to the security of his seat. This paper tests this prediction, and some others, with data from House bank scandal of 1991-92.

Punishment Severity and Criminal Collusion

Conventional analysis of incentives suggests that severe punishments discourage criminal activity. However, in China, increases in the severity of punishment for corruption has led to an apparent rise in such crimes. This research project investigates a new explanation for this finding.

We show how increased severity of punishment might encourage collusion between corrupt officials (by increasing the costs of informing against each other) and so make it harder for corruption to be uncovered. We also present experimental evidence in support of the theoretical conclusions.

Rational Inattention and Financial Crises

We show how Sims' concept of rational inattention could lead to financial crises. If certain information is rarely important to the price of a security, it maybe rational for investors to ignore it. Therefore, when the information is important, there may be a sharp shock to financial markets that could trigger a crises.

An example would be credit quality of mortgage-backed securities (MBS) prior to the subprime crisis. Because house prices had been rising since the Great Depression, default rates were extremely low even for poor credit quality (as long as the house price is greater than the outstanding mortgage, it rarely makes sense for a homeowner to default). Therefore credit quality may have been rationally ignored by MBS investors. When house prices fell and default rates increased, this gave the financial system a large shock.



  • China
  • East Asia
  • Great Britain
  • Nanjing, China
  • United Kingdom
  • Western Europe


  • Corporate Finance
  • Developing Nations
  • Economics
  • Global Financial Crises
  • Game Theory
  • International Financial Markets
  • Economic Development
  • Corporate Governance and Financial Markets
  • American Economic Policy
  • Privitization and Private-sector Development
  • Emerging Markets
  • Governance
  • International Debt
  • International Economics
  • International Finance
  • International Monetary Economics
  • International Monetary Theory
  • International Trade Theory and Policy
  • Newly Industrialized Countries
  • Political Economy & Development


  • Chinese