(file size: 852K, last updated: 09/1998)
Abstract: Macroeconomic model builders attempting to construct forecasting models frequently face constraints of data scarcity in terms of short time series of data, and also of parameter non-constancy and underspecification. Hence, a realistic alternative is often to guess rather than to estimate parameters of such models. This paper concentrates on repetitive guessing (drawing) parameters from iteratively changing distributions, with the straightforward objective function being that of minimisation of squares of ex-post prediction errors, weighted by penalty weights and subject to a learning process. The numerical Monte Carlo examples are those of a regression problem and a dynamic disequilibrium model.
EMU and Politically-Induced
Output Variability: Can the Stability and Growth Pack Help?
(file size: 29K, last updated: 05/1998)
Abstract: Rogoff, 1985, suggested that central bank independence would lead to lower inflation but greater output variability. Alesina and Gatti, 1995, demonstrated Rogoff’s work was partial by only considering economic sources of output variability. By including political factors, circumstances could be identified when making a central bank independent could reduce both inflation and output variability. In EMU, however, there is no choice about central bank independence. Starting with a review of the analysis presented by Alesina and Gatti, this paper suggests national fiscal policies could also be a source of politically-induced output variability. It reinterprets the analysis of Alesina and Gatti and identifies circumstances when the Stability and Growth Pact could help to reduce output variability in EMU.
Central Bank Independence: Gain Without Pain?
An Analysis Of
Political Business Cycle Theory and its Relationship with the New Political
(file size: 99K, last updated: 11/1998)
Abstract: The paper analyses the four principal model types that comprise the political business cycle literature. It then considers how this literature complements the ‘new political macroeconomics’ in analysing the impact of politics on inflation. Political business cycle models can be classified according to the political motivations of opportunism and ideology as well as by the way in which individuals form expectations. Using this classifications we pay particular attention to the underlying assumptions of the models. The paper concludes that a satisfactory model should incorporate the possibility of both ideological and opportunistic behaviour. While some academics continue to frown at the political business cycle literature, the ‘new political macroeconomics’ has generally been well received, perhaps as a consequence of its foundations stemming from the new classical macroeconomic revolution of the 1970s. However, the two have common political foundations in exploring the effect of political incentives on macroeconomic variables. The incorporation of rational expectations by political business cycle theorists has united the two strands of literature to some extent and yet, as we explain, there remain factors that one can take from the political business cycle literature and incorporate within the new political macroeconomics.
The New Political
(file size: 124K, last updated: 08/1998)
Abstract: The paper surveys the ‘old’ and ‘new’ political macroeconomics. In the former we consider how governments can be seen to manipulate the economy as to satisfy opportunistic or ideological motives, thereby creating opportunistic or partisan political business cycles. We examine how the macroeconomic revolution of the 1970s cast doubts on the ability of governments to freely and repeatedly create such cycles. Consequently, the new political macroeconomics have focused more on the effect of politically induced incentives on the inherent amount of inflation in the economic system. In exploring the concept of inflation bias we attempt to use ideas from the old political macroeconomics to show how the two strands of literature may complement one another. The paper finishes by focusing on the debate within the new political macroeconomics about the possible trade-off between reduced inflation bias and extra output volatility following the establishment of an independent central bank.
Expenditure over 40 Years
(file size: 91K, last updated: 09/1998)
Abstract: Using quarterly data for the last four decades, we test a number of traditional assumptions about aggregate consumer behaviour in the UK, with regard to the order of integration of the time series, the income elasticity of consumption and the stability of the parameters of the consumption function. In all cases, modification of these assumptions now appears to be necessary.
Can Welfare States Compete in a Global Economy?
What Should be the Role of the State in the 21st Century in the LDCs from the Alternative Public Choice Perspective that Starts from Schumpeter? Realistic Public Choice Approach
A State-Centred Public Choice Approach for a Semi-Democratic Country: Rent-Seeking Interest Groups in Turkish Trade Policy
Income Risk, The Tax-Benefit System and the Demand for Children
Analysing Drug Abuse with British Crime Survey Data: Modelling and Questionnaire Design Issues The figures are available here