The Experts below are selected from a list of 291 Experts worldwide ranked by ideXlab platform
Stanley L Winer - One of the best experts on this subject based on the ideXlab platform.
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Political competition and convergence to fundamentals with application to the Political Business Cycle and the size of government
2006Co-Authors: Stephen J Ferris, Soobin Park, Stanley L WinerAbstract:We address the problem of how to investigate whether economics, or politics, or both, matter in the explanation of public policy. The problem is first posed in a particular context by uncovering a Political Business Cycle (using Canadian data for 130 years) and by taking up the challenge to make this fact meaningful by finding a transmission mechanism through actual public choices. Since the Cycle is in real growth, and it is reasonable to suppose that public expenditure would be involved, the central task then is to investigate the role of (partisan and opportunistic) Political factors, as opposed to economic fundamentals, in the evolution of government size. We proceed by asking whether the data allow us to distinguish between the convergence and the nonconvergence hypotheses. Convergence means that Political competition forces public spending to converge in the long run to a level dictated by endowments, tastes and technology. Nonconvergence is taken to mean that Political factors other than the degree of Political competition prevent convergence to that long run. The general idea here, one that may be applied in any situation where the key issue is the role of economics versus politics over time, is that an overtly Political factor can be said to play a distinct role in the evolution of public choices if it can be shown to lead to departures from a dynamic path defined by the evolution of economic fundamentals in a competitive Political system.
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Political competition and convergence to fundamentals with application to the Political Business Cycle and the size of the public sector
Social Science Research Network, 2005Co-Authors: Stephen J Ferris, Soobin Park, Stanley L WinerAbstract:We address the problem of how to investigate whether economics, or politics, or both, matter in the explanation of public policy. We first pose the problem in a particular context by uncovering a Political Business Cycle (using Canadian data covering 130 years), and by taking up the challenge to make this fact meaningful by finding a transmission mechanism through actual public choices. Since the Cycle is in real growth and it is reasonable to suppose that public expenditure would be involved, we then focus on empirical investigation of the role of (partisan and opportunistic) Political factors, as opposed to economics, in the evolution of government size. We ask whether the data allow us to distinguish between the convergence and the nonconvergence hypotheses. Convergence means that Political competition forces public spending to converge in the longer run to a level dictated by endowments, tastes and technology. Nonconvergence is taken to mean that Political factors other than the degree of Political competition prevent convergence to that long run. The general idea is that a Political factor can clearly be said to play a role in the evolution of public choices if it can be shown to lead to departures from a dynamic path defined by economic fundamentals in a competitive Political system. The results of applying cointegration and error correction modeling to implement this idea show that public expenditure cannot serve as the required transmission mechanism. Of the Political factors considered, only variation in the degree of Political competition leads to substantial departures of public expenditure from its long run path defined by economic fundamentals. We conclude with some general implications of the analysis for future research.
Diganta Mukherjee - One of the best experts on this subject based on the ideXlab platform.
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A Stochastic Model with Inflation, Growth and Technology for the Political Business Cycle
Computational Economics, 2019Co-Authors: Gopal K Basak, Mrinal K Ghosh, Diganta MukherjeeAbstract:This paper analyzes an augmented Political Business Cycle model taking into account the effect of employment creation decisions by the ruling party jointly on inflation and growth. The objective is to maximize voter support in the next election that depends on the rate of unemployment as well as that of growth and inflation. We allow for stochasticity in the New Keynesian Phillips Curve model for the relationship between inflation and unemployment as well as in a benchmark labour productivity function for analyzing the growth rate. We provide explicit solution paths of the affine Markov control problem that results from our formulation. We also provide numerical illustrations with plausible parametric configurations to generate more insight into our model. Our results are broadly in line with the conventional wisdom of Phillips curve, with inflation and unemployment being roughly negatively related. The growth rate is, as expected, negatively related to the unemployment. We observe that, in the sequel, it is the lowering of the rate of inflation that provides support for the ruling party. Thus, electoral pressures drive the government to engage in cost control rather than productive investment (e.g., boosting employment or output growth).
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a mean reverting stochastic model for the Political Business Cycle
Stochastic Analysis and Applications, 2016Co-Authors: Gopal K Basak, Mrinal K Ghosh, Diganta MukherjeeAbstract:In this article, we look at the Political Business Cycle problem through the lens of uncertainty. The feedback control used by us is the famous NKPC with stochasticity and wage rigidities. We extend the New Keynesian Phillips Curve model to the continuous time stochastic set up with an Ornstein-Uhlenbeck process. We minimize relevant expected quadratic cost by solving the corresponding Hamilton-Jacobi-Bellman equation. The basic intuition of the classical model is qualitatively carried forward in our set up but uncertainty also plays an important role in determining the optimal trajectory of the voter support function. The internal variability of the system acts as a base shifter for the support function in the risk neutral case. The role of uncertainty is even more prominent in the risk averse case where all the shape parameters are directly dependent on variability. Thus, in this case variability controls both the rates of change as well as the base shift parameters. To gain more insight we have also studied the model when the coefficients are time invariant and studied numerical solutions. The close relationship between the unemployment rate and the support function for the incumbent party is highlighted. The role of uncertainty in creating sampling fluctuation in this set up, possibly towards apparently anomalous results, is also explored.
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a mean reverting stochastic modelfor the Political Business Cycle
Social Science Research Network, 2015Co-Authors: Gopal K Basak, Mrinal K Ghosh, Diganta MukherjeeAbstract:In this paper we look at the PBC problem through the lens of uncertainty. The feedback control used by us is the famous NKPC with stochasticity and wage rigidities. We extend the NKPC model to the continuous time stochastic set up with an Ornstein-Uhlenbeck process. We minimize relevant expected quadratic cost by solving the corresponding Hamilton-Jacobi-Bellman (HJB) equation. The basic intuition of the classical model is qualitatively carried forward in our set up but uncertainty also plays an important role in determining the optimal trajectory of the voter support function. The internal variability of the system acts as a base shifter for the support function in the risk neutral case. The role of uncertainty is even more prominent in the risk averse case where all the shape parameters are directly dependent on variability. Thus, in this case variability controls both the rates of change as well as the base shift parameters. To gain more insight we have also studied the model when the coefficients are time invariant and studied numerical solutions. The close relationship between the unemployment rate and the support function for the incumbent party is highlighted. The role of uncertainty in creating sampling fluctuation in this set up, possibly towards apparently anomalous results, is also explored.
Kenneth A. Schultz - One of the best experts on this subject based on the ideXlab platform.
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The Politics of the Political Business Cycle
British Journal of Political Science, 1995Co-Authors: Kenneth A. SchultzAbstract:Existing models of the Political Business Cycle have performed poorly in empirical tests because they have misspecified the interests of their primary actors – the incumbent politicians. While these models assume that governments face similar incentives to manipulate the economy at each election, governments' incentives can in fact vary from election to election depending upon their Political needs at the time. The more likely the government is to be re-elected, the less it can gain by inducing Cycles that are costly because of their impact on both the government's reputation and future macroeconomic performance. The degree to which the government manipulates the economy should thus be negatively correlated with its Political security going into the election. This prediction is tested by examining transfer payments in Great Britain, 1961–92. While a traditional model that is insensitive to the government's Political needs finds no evidence of Politically-motivated manipulations, a model which takes these factors into account reveals a robust, and at times sizeable, electoral-economic Cycle.
Gopal K Basak - One of the best experts on this subject based on the ideXlab platform.
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A Stochastic Model with Inflation, Growth and Technology for the Political Business Cycle
Computational Economics, 2019Co-Authors: Gopal K Basak, Mrinal K Ghosh, Diganta MukherjeeAbstract:This paper analyzes an augmented Political Business Cycle model taking into account the effect of employment creation decisions by the ruling party jointly on inflation and growth. The objective is to maximize voter support in the next election that depends on the rate of unemployment as well as that of growth and inflation. We allow for stochasticity in the New Keynesian Phillips Curve model for the relationship between inflation and unemployment as well as in a benchmark labour productivity function for analyzing the growth rate. We provide explicit solution paths of the affine Markov control problem that results from our formulation. We also provide numerical illustrations with plausible parametric configurations to generate more insight into our model. Our results are broadly in line with the conventional wisdom of Phillips curve, with inflation and unemployment being roughly negatively related. The growth rate is, as expected, negatively related to the unemployment. We observe that, in the sequel, it is the lowering of the rate of inflation that provides support for the ruling party. Thus, electoral pressures drive the government to engage in cost control rather than productive investment (e.g., boosting employment or output growth).
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a mean reverting stochastic model for the Political Business Cycle
Stochastic Analysis and Applications, 2016Co-Authors: Gopal K Basak, Mrinal K Ghosh, Diganta MukherjeeAbstract:In this article, we look at the Political Business Cycle problem through the lens of uncertainty. The feedback control used by us is the famous NKPC with stochasticity and wage rigidities. We extend the New Keynesian Phillips Curve model to the continuous time stochastic set up with an Ornstein-Uhlenbeck process. We minimize relevant expected quadratic cost by solving the corresponding Hamilton-Jacobi-Bellman equation. The basic intuition of the classical model is qualitatively carried forward in our set up but uncertainty also plays an important role in determining the optimal trajectory of the voter support function. The internal variability of the system acts as a base shifter for the support function in the risk neutral case. The role of uncertainty is even more prominent in the risk averse case where all the shape parameters are directly dependent on variability. Thus, in this case variability controls both the rates of change as well as the base shift parameters. To gain more insight we have also studied the model when the coefficients are time invariant and studied numerical solutions. The close relationship between the unemployment rate and the support function for the incumbent party is highlighted. The role of uncertainty in creating sampling fluctuation in this set up, possibly towards apparently anomalous results, is also explored.
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a mean reverting stochastic modelfor the Political Business Cycle
Social Science Research Network, 2015Co-Authors: Gopal K Basak, Mrinal K Ghosh, Diganta MukherjeeAbstract:In this paper we look at the PBC problem through the lens of uncertainty. The feedback control used by us is the famous NKPC with stochasticity and wage rigidities. We extend the NKPC model to the continuous time stochastic set up with an Ornstein-Uhlenbeck process. We minimize relevant expected quadratic cost by solving the corresponding Hamilton-Jacobi-Bellman (HJB) equation. The basic intuition of the classical model is qualitatively carried forward in our set up but uncertainty also plays an important role in determining the optimal trajectory of the voter support function. The internal variability of the system acts as a base shifter for the support function in the risk neutral case. The role of uncertainty is even more prominent in the risk averse case where all the shape parameters are directly dependent on variability. Thus, in this case variability controls both the rates of change as well as the base shift parameters. To gain more insight we have also studied the model when the coefficients are time invariant and studied numerical solutions. The close relationship between the unemployment rate and the support function for the incumbent party is highlighted. The role of uncertainty in creating sampling fluctuation in this set up, possibly towards apparently anomalous results, is also explored.
Allan Drazen - One of the best experts on this subject based on the ideXlab platform.
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the Political Business Cycle in colombia on the national and regional level
ARCHIVOS DE ECONOMÍA, 2003Co-Authors: Allan Drazen, Marcela EslavaAbstract:The plan of this report is the following. In the next section we present a conceptual background, reviewing the basic opportunistic Political Business Cycle, the problems with monetary theories, and the theory and evidence supporting the existence of a Political fiscal Cycle. In section 3, we describe the data and the basic format of the empirical tests. As indicated above, a major contribution of this study is both the collection of regional and local data and novel use of these data to test for policy effects of elections. In section 4 we discuss the empirical results at the national level. In section 5 we consider the results for fiscal variables at the regional (state and city) level. A key result of these sections is the effect of elections on investment spending prior to the election. We look at the effects of both national and regional elections on regional level data, giving special emphasis to the question of whether the regional results reflect a response to national elections or to regional elections themselves. In these two sections we also examine more closely some of the more surprising results. The final section contains a summary and conclusions.
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the Political Business Cycle after 25 years
Nber Macroeconomics Annual, 2000Co-Authors: Allan DrazenAbstract:Research on the Political Business Cycle since the mid-1970s is surveyed and assessed. We argue that models based on monetary surprises as the driving force are unconvincing explanations of either opportunistic or partisan Cycles. Research should concentrate on fiscal policy as the driving force, with monetary effects being the result of accommodation of fiscal impulses. We present a model Political Business-Cycle model (which we term the AFPM model) that combines active fiscal policy and passive monetary policy and that addresses a number of objections to earlier models.
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the Political Business Cycle after 25 years политический деловой цикл 25 лет спустя
Nber Macroeconomics Annual, 2000Co-Authors: Allan DrazenAbstract:Статья вышла через 25 лет после публикации Нордхауза (W. Nordhaus "The Political Business Cycle." Review of Economic Studies 1975 Vol. 42: 169-189.), в которой была предложена первая модель монетарного политико-делового цикла. Аллан Дрейзен дает обзор теорий политико-деловых циклов и эмпирических проверок, возникших за последние 25 лет. Автор предлагает и тестирует собственную модель цикла, включающую фискальную и денежную политики в рамках модели AFPM (active fiscal-passive monetary). Research on the Political Business Cycle since the mid-1970s is surveyed and assessed. We argue that models based on monetary surprises as the driving force are unconvincing explanations of either opportunistic or partisan Cycles. Research should concentrate on fiscal policy as the driving force, with monetary effects being the result of accommodation of fiscal impulses. We present a model Political Business Cycle model that combines active fiscal policy and passive monetary policy (which we term the AFPM model), which addresses a number of objections to earlier models, We present some empirical tests supportive of this model.
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Central-Bank Independence and Political Business Cycles
Central Banking Monetary Policies and the Implications for Transition Economies, 1999Co-Authors: Allan DrazenAbstract:The Political Business Cycle, by which one means fluctuations in economic activity that correspond to the electoral Cycle, can be observed in many countries. The classic study of the Political Business Cycle is Tufte (1978), in which he presented basic evidence of cyclical movements in policy instruments and in measures of economic activity that correlate with the Political Cycle and peak around election time. (We discuss below more formal econometric evidence.) For example, for the United States from 1948 to 1976, he argues that, with the exception of the Eisenhower years in the 1950s, Political Business Cycles have consisted of a two-year Cycle in “real disposable income, with accelerations in even-numbered years and decelerations in odd-numbered years,” as well as four-year Cycle “in the unemployment rate, with downturns in unemployment in the months before a presidential election and upturns in the unemployment rate usually beginning from twelve to eighteen months after the election” (Tufte, 1978, p. 27) He similarly argues there is clear evidence of a Political Cycle in outcomes in other democratic countries as well, in that “short-run accelerations in real disposable income per capita were more likely to occur in election years than in years without elections” (p. 11) in a sample of twenty-seven countries.
