money still makes the world go round the zonal view many leading monetary economists have come to regard the monetary aggregates as obsolete measures of the monetary policy stance this critique has led some to view money as having lost its central role in the conduct of monetary policy we say to those advocating excising money from monetary policy not so fast to better understand the potential role for money we develop a zonal view of monetary policy which reflects the historical regularity for the relative informativeness of the quantitative measures of monetary policy such as the monetary aggregates and real interest rates to depend on the inflation zone in which a central bank finds itself the zones range from high inflation zone 1 to deep deflation zone 5 with intermediate zones of moderate inflation zone 2 low inflation zone 3 and low deflation zone 4 we find considerable support for this view in the historical data which stretches back to the 19 th century seen from this perspective the past experience of central banks casts doubt on the singular importance often attributed to the short term real interest rate as an indicator of the stance of monetary policy this applies especially in the current low inflation environment in which many central banks find themselves the zonal view has far reaching implications for monetary policy frameworks for the analytical efforts to understand the monetary policy transmission mechanism and for central bank communication strategies this paper was prepared for the 21 st congress of the european economic association held in vienna on august 27 2006 the views expressed in the paper are solely those of the authors

inflation and welfare in a monetary economy it is in everyone s private interest to try to get someone else to hold non interest bearing cash and reserves but someone has to hold it all so these efforts must simply cancel out all of us spend several hours per year in this effort and employ thousands of talented and highly trained people to help us these person hours are simply thrown away wasted on a task that should not have to be performed at all

the liquidity trap and u s interest rates in the 1930s most current literature assumes that a central bank loses the ability to influence interest rates through variations in reserve supply as soon as overnight rates have been driven to zero i argue that reserve supply can be directly related to longer term rates when overnight rates are zero because banks reserve demand is then defined by the role of cash as an asset free of interest rate risk i present evidence that reserve supply affected longerterm interest rates in the u s from 1934 through 1939 while overnight rates were at the zero floor even when the changes in reserve supply reflected factors unlikely to have affected expectations of future overnight rates

deflation and depression is there an empirical link are deflation and depression empirically linked no concludes a broad historical study of inflation and real output growth rates deflation and depression do seem to have been linked during the 1930s but in the rest of the data for 17 countries and more than 100 years there is virtually no evidence of such a link

election goals and the allocation of campaign resources this paper compares the equilibrium behavior and outcomes in a model of two party competition for legislative seats under two different assumptions about the parties goals 1 parties maximize the expected number of seats won and 2 parties maximize the probability of winning a majority of the seats the two goals may lead to qualitatively different behavior and studying the differences yields insights into the relationship between the goals and the role of assymetries between the parties

target zones and exchange rate dynamics this paper develops a simple model of exchange rate behavior under a target zone regime it shows that the expectation that monetary policy will be adjusted to limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively somewhat surprisingly the analysis of target zones turns out to have a strong formal similarity to problems in option pricing and investment under uncertainty

not just the great contraction friedman and schwartz s a monetary history of the united states 1867 to 1960 milton friedman and anna j schwartz published a monetary history of the united states 1867 to 1960 with princeton university press in 1963 to critical acclaim since then the book s reputation has grown and it clearly has become one of the most influential volumes in economics in the twentieth century in this paper we document the extraordinary impact of a monetary history and argue that the key to this success was the use of the narrative approach to the problem of identifying the effects of monetary policy on economic activity

granting votes exposing the political bias of intergovernmental grants using the within between specification for panel data instead of alleviating fiscal inequalities intergovernmental grants are often used to fulfill the grantors political goals this study uses a unique panel dataset on more than 500 croatian municipalities over a 12 year period to uncover the extent to which grant distribution is biased owing to grantors electoral concerns instead of the default fixed effects approach to modelling panel data we apply a novel within between specification aimed at uncovering the contextual source of variation focusing on the effects of electoral concerns on grant allocation within and between municipalities we find evidence of a substantial political bias in grant allocations both within and between municipalities particularly when it comes to local level electoral concerns the paper offers researchers a new perspective when tackling the issue of politically biased grant allocation using panel data particularly when they wish to uncover the simultaneous impact of time variant and time invariant factors or when they cannot apply a quasi experimental approach because of specific institutional contexts

deflation risk in the euro area and central bank credibility abstract we analyze a new option based indicator of market perceptions of euro area deflation risks we find that during 2010 2015 long term deflation risks became slightly more sensitive to oil price changes and inflation surprises suggesting a subtle weakening in anchoring

do doctors respond to financial incentives uk family doctors and the gp fundholder scheme abstract the 1991 reforms to the uk nhs created a group of buyers of hospital care from amongst primary care physicians the implementation of the reforms was such that these buyers had incentives to increase their use of hospital services prior to entering the scheme in order to inflate their budgets it has been argued that non financial motives would limit such behaviour the paper shows that these health care providers did respond to the financial incentives offered by the scheme increasing hospital based activity prior to entry and so inflating their budgets upwards for the duration of the fundholding scheme

an economic analysis of voting in sweden using data from the swedish election studies between 1985 and 1994 supplemented with time series on inflation and unemployment i compare the impact of macro and microeconomic variables on the individual vote the principal finding is that macroeconomic variables influence the vote a bit more than microeconomic variables do in consequence both self interest and public interest appear to be important explanations of economic voting in sweden macroeconomic variables have however been much more influential in determining election outcomes since previous studies of economic voting have used cross sectional data only it is also worth noting that panel estimates indicate a much greater impact of macroeconomic variables on the individual vote than cross sectional estimates do

a model of political equilibrium in a representative democracy abstract this paper studies political equilibrium in a two party representative democracy in which the political parties are policy motivated and voters trade off their policy preferences against their party identity it is shown that the parties will in general adopt differing policy positions in equilibrium and that under certain qualifications the winning policy will lie between the more popular party s preferred policy and a certain utilitarian optimum the winning policy will be closer to this utilitarian optimum the less biased the electorate is in terms of party identification

lobbying political competition and local land supply recent evidence from spain abstract we analyze whether local land supply is influenced by the degree of political competition and interpret the findings as indications of the influence wielded by land developer lobbies we use a new database including both political and land supply data for more than 2 000 spanish municipalities for the period 2003 2007 in spain land use policies are largely a local responsibility with municipalities needing periodically to pass comprehensive land use plans the main policy variable in these plans and the one analyzed here is the amount of land classified for potential development we measure local political competition as the margin of victory of the incumbent government this variable is however potentially endogenous since not only do votes affect policy but also policy is expected to affect votes to deal with this problem we instrument this variable using the votes at the first national legislative elections following the re establishment of democracy and votes actually obtained regionally at the same type of election the results indicate that stiffer political competition does indeed reduce the amount of new land designated for development this effect is found to be most marked in suburbs in towns with a high percentage of commuters and homeowners and in municipalities governed by the left

the macroeconomics of the great depression a comparative approach recently research on the causes of the great depression has shifted from a heavy emphasis on events in the united states to a broader more comparative approach that examines the interwar experiences of many countries simultaneously in this lecture i survey the current state of our knowledge about the depression from a comparative perspective on the aggregate demand side of the economy comparative analysis has greatly strengthened the empirical case for monetary shocks as a major driving force of the depression an interesting possibility suggested by this analysis is that the worldwide monetary collapse that began in 1931 may be interpreted as a jump from one nash equilibrium to another on the aggregate supply side comparative empirical studies provide support for both induced financial crisis and sticky nominal wages as mechanisms by which nominal shocks had real effects still unresolved is why nominal wages did not adjust more quickly in the face of mass unemployment this abstract was borrowed from another version of this item

the spectre of deflation a review of empirical evidence what explains the widespread fear of deflation this article reviews the history of thought economic history and empirical evidence on deflation with a view to answering this question it also outlines informally the main effects of deflation in applied monetary models the main finding is that for both historical and contemporary deflations there are many open empirical questions that could be answered using the tools economists use to study inflation and monetary policy more generally qu est ce qui explique la peur tres repandue de la deflation ce memoire fait un tour d horizon de l histoire de la pensee economique de l histoire economique et des resultats empiriques quant aux effets de la deflation en vue de repondre a cette question on fait aussi echo informellement aux effets principaux de la deflation dans les modeles monetaires appliques ce qui ressort principalement de ce travail est que tant pour les deflations dans l histoire que dans le monde contemporain il y a bien des questions empiriques encore irresolues auxquelles on pourrait donner une reponse en utilisant l outillage mental que les economistes utilisent pour etudier l inflation et la politique monetaire plus generalement sp c tre n thing that is thought to be seen but has no material existence haunting presentiment of ruin war madness etc

balanced budget redistribution as the outcome of political competition this paper models balanced budget redistribution between socio economic groups as the outcome of electoral competition between two political parties equilibrium is unique in the present model and a sufficient condition for existence is given requiring that there be enough stochastic heterogeneity with respect to party preferences in the electorate the validity of hotelling s principle of minimum differentiation and of director s law are examined under alternative hypotheses concerning administrative costs of redistributions and voter s possibilities both of abstaining from voting and of becoming campaign activists for one of the parties the policy strategy of expected plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality incomes are fixed and known so lump sum taxation is feasible however constraints on tax transfer differentiation between individuals are permitted in the analysis

permanent and transitory shocks in real output estimates from nineteenth century and postwar economies this paper reexamines olivier j blanchard and danny quah s 1989 aggregate supply demand model interpretation of output shocks using data from ten countries although postwar data support their interpretation the model is not supported by nineteenth century data in the postwar period permanent output shocks cause the price level to move in the opposite direction like supply shocks and temporary output shocks cause the price level to move in the same direction like demand shocks but with pre world war i data permanent output shocks typically cause price level movements in the same direction the results are systematic and cannot be explained by data problems

interest rate interactions in the classical gold standard 1880 1914 was there any monetary independence this paper examines an hypothesis of svensson 1994 journal of monetary economics 33 157 199 that a credible target zone can confer on a country a degree of independence in the operation of its monetary policy even when exchange rates are fixed we test this hypothesis for the classical gold standard using a newly created monthly data base for the period 1880 1913 building on the recently noted finding that the classical gold standard represented a credible well behaved target zone system we propose a number of ways of testing the svensson model our main finding is that the classical gold standard did indeed confer some independence in the operation of monetary policy for participating countries this would seem to have an important bearing on the kind of institutional framework required for a modern day target zone to function effectively and in particular to weather speculative attacks

wage adjustment under low inflation evidence from u s history data from recent years indicate that employers are especially unlikely to cut the nominal wage rate paid for a job adjustments to real or relative wages that require absolute cuts in money wages are very rare relative to the frequency one might expect to observe based on distributions of wage changes that do not require money wage cuts erica l groshen and mark e schweitzer 1995 1997 david e lebow et al 1999 a worker who remains with the same employer from one year to the next is accordingly unlikely to report an absolute reduction in the nominal wage he receives david card and dean hyslop 1997 shulamit kahn 1997 joseph g altonji and paul j devereux 1999 the existence and causes of downward nominal wage rigidity have implications for macroeconomic outcomes and for practical issues in monetary policy presumably efficient operation of labor markets requires many downward adjustments of relative wages and occasional decreases in the overall wage level relative to product prices if the average rate of wage inflation were close to zero some of these relative or real wage adjustments would be blocked by a floor under current levels of nominal wage rates george a akerlof et al 1996 assert that downward nominal wage rigidity reflects fundamental preferences of workers and argue that it implies a central bank should target a rate of price inflation greater than zero because a target of zero inflation will impose permanent real costs on the economy p 2 the notion that downward nominal wage rigidity is a fundamental constraint so that inflation serves to grease the wheels of the labor market is controversial even among those who accept the possibility of nominal rigidities in general it has been argued that downward nominal wage rigidity as distinct from such phenomena as menu costs which would discourage adjustment of a wage in either direction david romer 1993 may be an artifact of an inflationary monetary regime and would disappear in the absence of persistent inflation nominal wage reductions would no longer be seen as unusual if the average nominal wage was not growing workers would not see them as unfair and firms would not shy away from imposing them robert j gordon 1996 p 62 see also n gregory mankiw 1996 william poole 1998 william b english 2000 to see whether downward nominal wage rigidity would exist in a noninflationary regime it may be useful to examine data from times and places where there was no persistent wage inflation for the united states at least that excludes data from years since the second world war throughout the postwar period price inflation or real wage growth has been sufficient to keep average wage inflation above zero before the second world war on the other hand long run trend rates of price inflation were often close to zero or negative robert b barsky 1987 if wage inflation was correspondingly low u s historical data may offer tests of the proposition that downward nominal wage rigidity exists even in noninflationary

overcoming the zero bound on nominal interest rates with negative interest on currency gesell s solution an economy is in a liquidity trap when monetary policy cannot influence either real or nominal variables of interest a necessary condition for this is that the short nominal interest rate is constrained by its lower bound typically zero the paper considers two small analytical models one old keynesian the other new keynesian possessing equilibria where not only the short nominal interest rate but nominal interest rates at all maturities can be stuck at their zero lower bound when the authorities remove the zero nominal interest rate floor by adopting an augmented monetary rule that systematically keeps the nominal interest rate on base money including currency at or below the nominal interest rate on non monetary instruments the lower bound equilibria are eliminated thus allowing an economic system to avoid the trap or to escape from it this rule will involve paying negative interest on currency that is imposing a carry tax on currency an idea first promoted by gesell the administration costs associated with a currency carry tax must be set against the benefits of potentially lower shoe leather costs and lower menu costs which are made possible by the its introduction there are also output gap avoidance benefits from eliminating the zero lower bound trap

optimal fiscal and monetary policy some recent results this paper studies the quantitative properties of fiscal and monetary policy in business cycle models in terms of fiscal policy optimal labor tax rates are virtually constant and optimal capital income tax rates are close to zero on average in terms of monetary policy the friedman rule is optimal nominal interest rates are zero and optimal monetary policy is activist in the sense that it responds to shocks to the economy

explaining intergovernmental grants australian evidence the dodo suddenly called out the race is over and they all croded round it panting and asking but who has won lewis carroll alice s adventures in wonderland

golden fetters the gold standard and the great depression barry eichengreen oxford university press new york 1992 pp xix 448 39 95

the political determination of intergovernmental grants in australia intergovernmental grants have been conventionally explained on the basis of either equity efficiency and or institutional considerations this paper seeks to model australian intergovernmental grants by including both traditional public finance variables and public choice influences that is grants are used by federal government politicians to purchase political capital thereby enhancing their own chances of reelection the models employed in this paper are tested for six australian states for the period 1981 82 to 1991 92 using unsystematic grant transfers the results provide support for these public choice considerations and highlight the importance of incorporating institutional factors and controlling for misspecification in the error structure in estimates of this type

money and inflation in the euro area a case for monetary indicators abstract this paper examines inflation indicators for the euro area by studying the relationship between inflation output money and interest rates using data spanning 1980 2001 the central finding is that both the output gap and the real money gap the difference between the real money stock and the long run equilibrium real money stock contain considerable information regarding future inflation in contrast the eurosystem s money growth indicator the difference between nominal money growth and a reference value the prominent first pillar in its monetary strategy contains little information about future inflation and no information beyond that contained in the output and real money gaps the predictive performance of the output gap has improved compared to that in a previous version of this paper most likely because of better estimation methods

geographical redistribution with disproportional representation a politico economic model of norwegian road projects politicians bias public policies to favor particular election districts according to the traditional common pool model districts facing low tax shares should receive relatively large government projects we suggest a swing voter model where the number of voters on the ideological cut point lack of party identification and number of district representatives per voter determine project sizes we analyze the allocation of state road investments in norway from 1973 1997 exploiting unique data on characteristics of voters legislative representation and tax prices in 19 election districts geographical representation to parliament is biased mostly due to an ancient constitution shares of swing voters and legislative over representation lead to higher levels of road investments while high levels of party identification reduce investments

do doctors charge high income patients more abstract when doctors are unconstrained in setting fees they charge higher fees to high income patients for a standard gp consultation the average fee gap is 25 of a minimum price competition closes this gap but not local area income

overcoming the zero bound on interest rate policy the paper proposes three options for overcoming the zero bound on interest rate policy a carry tax on money open market operations in long bonds and monetary transfers a variable carry tax on electronic bank reserves could enable a central bank to target negative nominal interest rates a carry tax could be imposed on currency to create more leeway to make interest rates negative quantitative policy monetary transfers and open market purchases of long bonds could stimulate the economy by creating liquidity broadly defined a central bank needs more fiscal support than usual from the treasury to pursue quantitative policy at the interest rate floor

nominal wage stickiness and aggregate supply in the great depression building on earlier work by eichengreen and sachs we use data for 22 countries to study the role of wage stickiness in propagating the great depression recent research suggests that monetary shocks transmitted internationally by the gold standard were a major cause of the depression accordingly we use money supplies and other aggregate demand shifters as instruments to identify aggregate supply relationships we find that nominal wages adjusted quite slowly to falling prices and that the resulting increases in real wages depressed output these findings leave open the question of why wages were so inertial in the face of extreme labor market conditions

america s historical experience with low inflation the inflation of the 1970s was a marked deviation from america s typical peacetime historical pattern as a hard money country we should expect america to continue to be a hard money low inflation country in the future at least in peacetime the low rate of future inflation that we thus forecast changes the balance of macroeconomic risks and opportunities the risk of debt deflation mediated recessions is somewhat higher because a low trend rate of goods and services price index inflation somewhat increases the chances of deflation but it does not raise such risks as much as one might think the failure of the fisher effect to hold empirically means that a low inflation era will in all likelihood be a high real interest rate era but such high real interest rates do not appear to significantly discourage investment or growth

election goals and income redistribution recent evidence from albania this paper examines the impact of political competition on block grants from federal to sub federal levels of government we model the extent and direction of income redistribution as determined proximately by the political agendas of central decision makers and at a deeper level by the institutions within which they nd themselves operating we contrast two political objective functions that yield di erent empirical predictions of the ways in which politics should a ect scal policy lessons learned here may prove important in understanding limits on the types of redistribution possible via block grants given the institutional framework in both developing and developed countries 2001 elsevier science b v all rights reserved jel classixcation h1 h7 o1

deflation and monetary policy in a historical perspective remembering the past or being condemned to repeat it inflation is currently low and stable in industrialized countries but might deflation replace inflation as a major policy concern we present a broad cross country historical study of deflation over the past two centuries in order to shed light on current policy challenges in the light of the relevant theoretical approaches we empirically characterize good bad and ugly deflations assess similarities between the current low inflation environment and that of the gold standard period and discuss lessons from the historical record as to policies to escape undesirable deflation and the relative merits of interest rate and monetary instruments michael bordo and andrew filardo

the political economy of intergovernmental grants evidence from a maturing democracy we evaluate the impact of political forces in the allocation of intergovernmental grants in portugal as it matured from a young to an established democracy using a large and unexplored dataset we show that political variables condition the granting system and that their importance changed over time while tactical manipulation in the distribution of grants among municipalities seems to exist only in the early years of democracy opportunistic effects are stronger in the latter years we argue that the latter effect is due to a change in the political environment and to the electorate s lack of information on intergovernmental grants

ideology tactics and efficiency in redistributive politics we model the electoral politics of redistribution when voters and parties care about inequality in addition to their private concerns for consumption and votes respectively ideological concerns about income redistribution lead each party to adopt a general proportional income tax adjusted to appeal to the ideological leanings of high clout groups with disproportionately many swing voters which the parties also ply with pork barrel projects our results relate to director s law which says that redistributive politics favors middle classes at the expense of both rich and poor

measurement bias in the hicp what do we know and what do we need to know the harmonized index of consumer prices hicp is the primary measure of inflation in the euro area and plays a central role in the policy deliberations of the european central bank ecb the ecb defines its treaty mandate of price stability as a year on year increase in the harmonised index of consumer prices hicp for the euro area of below 2 to be maintained over the medium term among the rationales given for defining price stability as prevailing at some positive measured inflation rate is the possibility that the hicp as published incorporates measurement errors of one sort or another that may cause it to systematically overstate the true rate of inflation in the euro area this paper reviews what currently is known about the scope of measurement error in the hicp we conclude that given the vague conceptual framework of the hicp the scant research on price measurement issues in the eu and the ongoing improvements in the hicp there is very little scientific basis at this time for a point or even an interval estimate of a positive bias in the hicp copyright blackwell publishers ltd 2004

is deflation costly after all the perils of erroneous historical classifications i estimate average economic activity during periods of inflation and deflation while accounting for measurement errors in 19th century prices these measurement errors lead to underestimation overestimation of economic activity during periods of inflation deflation by exploiting multiple deflation indicators it is possible to recover the true relationship the shortfall of us industrial production growth during periods of deflation ranges from 4 5 pp to 7 6 pp instead of 2 pp i also find a negative relationship between deflation and real activity in the uk i then examine the cross country variation in the estimates for eleven countries the patterns are consistent with stronger biases for countries with more serious measurement errors in prices

intergovernmental grants as a tactical instrument empirical evidence from swedish municipalities are grants to swedish municipalities tactical in this essay i derive testable implications from a theoretical voting model and test these on a panel of 255 swedish municipalities 1981 1995 in order to decide which regions that are politically powerful both election results and survey data from the swedish election studies are used the results although somewhat ambiguous support the hypothesis that intergovernmental grants are used in order to win votes

electoral goals and center state transfers a theoretical model and empirical evidence from india we construct a model of redistributive politics where the central government is opportunistic and uses its discretion to make transfers to state governments on the basis of political considerations these considerations are the alignment between the incumbent parties at the central and state levels and whether a state is a swing state or not a testable prediction from the model is that a state that is both swing and aligned with the central government is especially likely to receive higher transfers we test this prediction using indian data for 14 states from 1974 75 to 1996 97 we find that a state which is both aligned and swing in the last state election is estimated to receive 16 higher transfers than a state which is unaligned and non swing

eurosystem monetary targeting lessons from u s data abstract using a small empirical model of inflation output and money estimated on u s data we compare the relative performance of monetary targeting and inflation targeting the results show monetary targeting to be quite inefficient yielding both higher inflation and output variability this is true even with a nonstochastic money demand formulation our results are also robust to using a p model of inflation therefore in these popular frameworks there is no support for the prominent role given to money growth in the eurosystem s monetary policy strategy

the future of monetary aggregates in monetary policy analysis this paper considers the role of monetary aggregates in modern macroeconomic models of the new keynesian type the focus is on possible developments of these models that are suggested by the monetarist literature and that in addition seem justified empirically both the relation between money and inflation and between money and aggregate demand are considered regarding the first relation it is argued that both the mean and the dynamics of inflation in present day models are governed by money growth this relationship arises from a conventional aggregate demand channel claims that an emphasis on the link between monetary aggregates and inflation requires a direct channel connecting money and inflation are wide of the mark the relevance of money for aggregate demand in turn lies not via real balance effects or any other justification for money in the is equation but on money s ability to serve as a proxy for the various substitution effects of monetary policy that exist when many asset prices matter for aggregate demand this role for monetary aggregates which is supported by empirical evidence enhances the value of money to monetary policy

optimal monetary policy optimal monetary policy maximizes the welfare of a representative agent given frictions in the economic environment constructing a model with two sets of frictions costly price adjustment by imperfectly competitive firms and costly exchange of wealth for goods we find optimal monetary policy is governed by two familiar principles first the average level of the nominal interest rate should be sufficiently low as suggested by milton friedman that there should be deflation on average yet the keynesian frictions imply that the optimal nominal interest rate is positive second as various shocks occur to the real and monetary sectors the price level should be largely stabilized as suggested by irving fisher albeit around a deflationary trend path since expected inflation is roughly constant through time the nominal interest rate must therefore vary with the fisherian determinants of the real interest rate although the monetary authority has substantial leverage over real activity in our model economy it chooses real allocations that closely resemble those which would occur if prices were flexible in our benchmark model there is some tendency for the monetary authority to smooth nominal and real interest rates

is low priced primary care bad for quality evidence from australian general practice we examine whether patients perceptions of general practitioner gp care varies by the price paid for consultations australian consumer survey data from 2275 individuals were used to analyse the relationship between price and patient experience of gp care using both standard models for count data and a latent class model that distinguishes between patients with high and low quality experiences we find no evidence that lower prices have a negative impact on patients perceptions of gp quality nevertheless some patient characteristics such as age gender and health status play a significant role in quality of care perceptions the results show that australian patients have not had to compromise gp quality as expressed in terms of patient experience when seeking low priced care this supports the view that there are sufficient checks and balances on the gp sector in australia to ensure positive patient experiences even for low cost gp consultations

resources and student achievement evidence from a swedish policy reform a policy change is used to estimate the effect of teacher density on student performance we find that an increase in teacher density has a positive effect on student achievement the baseline estimate obtained by using the grade point average as the outcome variable implies that resource increases corresponding to the class size reduction in the star experiment a reduction of seven students improves performance by 2 6 percentile ranks or 0 08 standard deviations when we used test score data for men potentially a more objective measure of student performance the effect of resources appears to be twice as large

distributive politics and spatial equity the allocation of public investment in chile abstractdistributive politics and spatial equity the allocation of public investment in chile regional studies this paper analyzes the influence of electoral concerns on investment distribution from the central government to chilean municipalities drawing upon panel data it shows that investment is mediated by pork barrel and political budget cycles as well as favouring the relatively better off areas estimations also reveal that resources are channelled to the municipalities where the vote margin in local elections is larger whereas national results are not relevant indicating that local governments lobbying capacity is prioritized over national electoral interests based on these results the implications for regional governance and for reducing the margin of arbitrary allocations are discussed

do formula based intergovernmental transfer mechanisms eliminate politically motivated targeting evidence from ghana abstract various countries have adopted formulas for determining intergovernmental transfers as a strategy to limit the role of political considerations in resource allocation in this paper we investigate a formula based system of allocating resources from a central government to local governments to determine whether the political characteristics of recipient areas have any bearing on their allocation specifically we study the sharing of resources of the district assemblies common fund dacf in ghana amongst the country s district governments over the period 1994 to 2005 we find evidence that the mechanism does not eliminate politically motivated targeting of the grants per capita dacf grants were higher in districts where vote margins in the previous presidential election were lower suggesting that swing districts were targeted we find evidence that dacf formula indicators and their weighting were chosen and amended to produce politically desired patterns of transfers

nominal shocks and real exchange rates evidence from two centuries abstract this paper employs structural vector autoregression methods to examine the contribution of real and nominal shocks to real exchange rate movements using two hundred and seventeen years of data from britain and the united states shocks are identified with long run restrictions the long time series makes possible an investigation of how the role of nominal shocks has evolved over time due to changes in the shock processes or to structural changes in the economy which might alter how a shock is transmitted to the real exchange rate the sample is split at 1913 which is the end of the classical gold standard period the last of the monetary regimes of the 19th century the earlier subsample 1795 1913 shows a much stronger role for nominal shocks in explaining real exchange rate movements than the later subsample 1914 2010 counterfactual analysis shows that the difference between the two periods is mainly due to the size of the nominal shocks rather than structural changes in the economy these findings are consistent with the view that the financial instability and frequent deflation of the 19th century had real economic effects

the timing of elections in federations a disciplining device against soft budget constraints we introduce political economics into the soft budget constraint problem by asking if the timing of elections has the potential to harden budget constraints specifically we ask under which circumstances the soft budget constraint problem is worse with synchronized elections i e simultaneous central and regional office terms or with staggered elections i e terms of office that do not coincide we find that staggered elections clearly improve fiscal discipline at the local level as well as welfare

the impact of federal spending on house election outcomes while it is widely believed by academics politicians and the popular press that incumbent members of congress are rewarded by the electorate for bringing federal dollars to their district the empirical evidence supporting that claim is extremely weak one explanation for the failure to uncover the expected relationship between federal spending and election outcomes is that incumbents who expect to have difficulty being reelected are likely to exert greater effort in obtaining federal outlays since it is generally impossible to adequately measure this effort the estimated impact of spending is biased downward because of an omitted variable bias we address this estimation problem using instrumental variables for each house district we use spending outside the district but inside the state containing the district as an instrument for spending in the district federal spending is affected by a large number of actors e g governors senators mayors and other house members in the state delegation