the inflation tax in a real business cycle model money is incorporated into a real business cycle model using a cash in advance constraint the model economy is used to analyze whether the business cycle is different in high inflation and low inflation economies and to analyze the impact of variability in the growth rate of money in addition the welfare cost of the inflation tax is measured and the steady state properties of high and low inflation economies are compared

subjective interest rate uncertainty and the macroeconomy a cross country analysis abstract we ask whether uncertainty about interest rates is important for economic activity the effects of interest rate uncertainty on the economy are examined through the lens of a small var where the assumption that uncertainty can affect real activity contemporaneously but not vice versa is indeed in line with the data our measure of uncertainty stems from professional forecasts of short and long term interest rates and accounts for both disagreement among forecasters and the perceived variability of future aggregate shocks studying a panel of countries we find that subjective interest rate uncertainty has large negative and persistent effects on the economy

expectations and macroeconomic fluctuations in the euro area using a dynamic multivariate system where variables are aligned in order to reflect data availability at the time when agents form their expectations we show that survey expectations contain relevant information about business cycle developments in the euro area

expectations and economic fluctuations an analysis using survey data abstract using survey based measures of future u s economic activity from the livingston survey and the survey of professional forecasters we study how changes in expectations and their interaction with monetary policy contribute to fluctuations in macroeconomic aggregates we find that changes in expected future economic activity are a quantitatively important driver of economic fluctuations a perception that good times are ahead typically leads to a significant rise in current measures of economic activity and inflation we also find that the short term interest rate rises in response to expectations of good times as monetary policy tightens

information rigidities inflation perceptions and the media lessons from the euro cash changeover the objective of theoretical models of information rigidities is to capture the fact that people are constrained in their ability to acquire and process all available information given that most people obtain their information about the economy from the media press coverage of the economy may exert an influence on peoples attitudes this paper tests for this influence by examining consumers inflation perceptions in the aftermath of the euro cash changeover which serves as a natural experiment using a new data set that quantifies the intensity and tone of media reports we document that media reporting has had a statistically significant and economically meaningful impact on inflation perceptions and contributed to their sharp rise in the aftermath of the euro cash changeover and to the divergence between inflation perceptions and actual inflation rates jel e53 d83

the effects of volatility in the terms of trade on output growth new evidence abstract this paper examines the empirical evidence for the hypothesis that there is a negative relationship between terms of trade volatility and output growth it finds a statistically significant link between income terms of trade volatility and lower growth rates when the degree of volatility in the income terms of trade is decomposed into its components fluctuations in real exports are of a magnitude similar to those in the relative price of tradables similarly the volatility in the net barter terms of trade is equally affected by variations in the price of exports and of imports any policies aimed at stabilizing the terms of trade or any of its components need to take account of this

direct evidence on sticky information from the revision behavior of professional forecasters we provide direct evidence on the sticky information model of mankiw and reis 2002 by examining how frequently individual professional forecasters revise their forecasts we draw interest rate and unemployment rate forecasts from the monthly wall street journal surveys conducted between 2003 and 2013 consistent with the sticky information model we find that forecasters frequently leave their forecasts unrevised but find evidence that revision frequency increases following larger changes in the information set we also find revision frequencies became more sensitive to new information after the 2008 financial crisis but only weak evidence that frequent revisers forecast more accurately

effects of stabex on acps economic growth further evidence the paper deals with the economic growth of the open and small developing countries which signed the lome convention henceforth acps results showing that earnings instability damages their economic performance can be used to support the eu policy of guaranteeing financial aid to those countries suffering reductions in export proceeds the second section of the paper analysing the workings of stabex however highlights certain weaknesses in the effectiveness of stabex transfers when their impact on economic growth is considered the general conclusion is that if the current eu acp negotiations for lome v are to be successful then some aspects of the scheme eligibility criteria and use of funds will have to be radically changed

behavioral theories of the business cycle we explore the business cycle implications of expectation shocks and of two well known psychological biases optimism and overconfidence the expectations of optimistic agents are biased toward good outcomes whereas overconfident agents overestimate the precision of the signals that they receive both expectation shocks and overconfidence can increase business cycle volatility while preserving the model s properties in terms of comovement and relative volatilities in contrast optimism is not a useful source of volatility in our model jel e3

monetary policy rules macroeconomic stability and inflation a view from the trenches i estimate a forward looking monetary policy reaction function for the federal reserve for the periods before and after paul volcker s appointment as chairman in 1979 using information that was available to the fomc in real time from 1966 to 1995 the results suggest broad similarities in policy and point to a forward looking approach to policy consistent with a strong reaction to inflation forecasts during both periods this contradicts the hypothesis based on analysis with ex post constructed data that the instability of the great inflation was the result of weak fomc policy responses to expected inflation a difference is that prior to volcker s appointment policy was too activist in reacting to perceived output gaps that retrospectively proved overambitious drawing on contemporaneous accounts of fomc policy i discuss the implications of the findings for alternative explanations of the great inflation and the improvement in macroeconomic stability since then

on some computational aspects of equilibrium business cycle theory abstract this paper evaluates the accuracy of quadratic approximate methods in the context of a simple real business cycle model the level of accuracy is found to be very high on the face of the results reported here we are confident that the different computation methods proposed to date in this literature can be employed interchangeably

testing for indeterminacy an application to u s monetary policy reply this paper considers a prototypical new keynesian model in which the equilibrium is undetermined if monetary policy is passive the likelihood based estimation of dynamic equilibrium models is extended to allow for indeterminacies and sunspot fluctuations we construct posterior weights for the determinacy and indeterminacy region of the parameter space and estimates for the propagation of fundamental and sunspot shocks according to the estimated model u s monetary policy post 1982 is consistent with determinacy whereas the pre volcker policy is not we find that before 1979 indeterminacy substantially altered the propagation of shocks

productivity growth consumer confidence and the business cycle abstract the objective of this paper is to provide in the context of a dynamic general equilibrium model an answer to the following five questions 1 to what extent does an economy subject to regular variations in labor productivity growth differ from one where labor productivity is constant 2 what is the impact on major macro indicators of a one time change in labor productivity growth 3 what are the business cycle implications of autonomous non falsifiable changes in growth expectations 4 what is the potential of such expectation changes for explaining the volatility of consumption to output ratio 5 can autonomous changes in growth expectations help us understand recent business cycle episodes

global markets and national politics collision course or virtuous circle increasing exposure to trade foreign direct investment and liquid capital mobility have not prompted a pervasive policy race to the neoliberal bottom among the oecd countries one reason is that there are strong political incentives for governments to cushion the dislocations and risk generated by openness moreover countries with large and expanding public economies when balanced with increased revenues even from capital taxes have not suffered from capital flight or higher interest rates this is because the modern welfare state comprising income transfer programs and publicly provided social services generates economically important collective goods that are undersupplied by markets and that actors are interested in productivity value these range from the accumulation of human and physical capital to social stability under conditions of high market uncertainty to popular support for the market economy itself as a result arguments about the demise of national autonomy in the global economy are considerably overdrawn

one size fits all monetary policy and asymmetric household debt cycles in u s states i investigate the nonlinear effects of monetary policy through differences in household debt across u s states after constructing a novel indicator of inflation for the states i compute state specific monetary policy stances as deviations from an aggregate taylor rule i find that the effectiveness of monetary policy is curtailed during periods of large household debt imbalances moreover a common u s monetary policy does not fit all it may have asymmetric effects on the economic performance across states particularly at times of high dispersion in the household debt imbalances as it may have been the case around the great recession

does confidence data help forecast business cycles new evidence from canada abstractthis paper assesses the contribution of confidence or sentiment data for predicting canadian economic slowdowns a probit framework is applied to an indicator of the status of the canad

news shocks in open economies evidence from giant oil discoveries this article explores the effect of news shocks in open economies using worldwide giant oil and gas discoveries as a directly observable measure of news shocks about future output the delay between a discovery and production is on average four to six years we first analyze the effects of a discovery in a two sector small open economy model with a resource sector we then estimate the effects of giant oil and gas discoveries on a large panel of countries our empirical estimates are consistent with the predictions of the model after an oil or gas discovery the current account and saving rate decline for the first five years and then rise sharply during the ensuing years investment rises robustly soon after the news arrives whereas gdp does not increase until after five years employment rates fall slightly and remain low for a sustained period

export fluctuations and economic growth an empirical analysis abstract the uncertainty associated with trade variability is generally resumed to exert a significant effect on the domestic economy of loss developed countries inadequately equipped to cope with these fluctuations the belief that it has a negative influence on these economies has been for several decades the dominant hypothesis among economists but it has been challenged on both theoretical and empirical growths the present paper proposes to investigate this problem from an empirical point of view cross country analysis is developed to investigate the influence of export instability on the domestic economy of less advanced nations the results show that no clear conclusions for the general case can be provided since they are sensitive to the particular time period considered a negative impact can be expected when price and quantity instability appear to reinforce each other but this is not always the case

geographic concentration and china s agricultural export instability this paper investigates the impacts of geographic concentration on china s agricultural export instability with a multiple region variance decomposition approach the decomposition results suggest that china s agricultural export concentration into the japanese market greatly lowers agricultural export instability while concentration into the hong kong south korea asean the us and russian federation markets increases export instability china s exports to the eu also lower its agricultural export instability further decomposition results indicate that the impacts of geographic concentration on different agricultural product export instabilities are different

benchmarking across borders electoral accountability and the necessity of comparison when the economy in a single country contracts voters often punish the government when many economies contract voters turn against their governments much less frequently this suggests that the international context matters for the domestic vote yet most research on electoral accountability assumes that voters treat their national economies as autarkic we decompose two key economic aggregates growth in real gross domestic product and unemployment into their international and domestic components and demonstrate that voters hold incumbents more electorally accountable for the domestic than for the international component of growth voters in a wide variety of democracies benchmark national economic growth against that abroad punishing rewarding incumbents for national outcomes that underperform outperform an international comparison tests suggest that this effect arises not from highly informed voters making direct comparisons but from pre benchmarking by the media when reporting on the economy the effect of benchmarked growth exceeds that of aggregate national growth by up to a factor of two and outstrips the international component of growth by an even larger margin implying that previous research may have underestimated the strength of the economy on the vote

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

anticipated versus unanticipated terms of trade shocks and the j curve phenomenon abstract using a dynamic stochastic general equilibrium dsge model we examine the impact of anticipated and unanticipated terms of trade tot shocks on aggregate output inflation and the trade balance tb this allows us to offer an alternative explanation of the j curve phenomenon we find that an unanticipated tot shock increases real output as well as inflation but the j curve phenomenon may not exist under a certain condition however under the same condition an anticipated tot shock leads to the j curve effect we find that our main result concerning the j curve phenomenon continues to hold even if the assumption of rational expectations about the tot is relaxed further analysis reveals that the presence of a cost channel of monetary policy increases the intensity of the j curve effect assuming plausible parameter values while using a more general model calibration results support our theoretical predictions

the vp function revisited a survey of the literature on vote and popularity functions after over 40 years nannestad and paldam public choice 79 213 245 1994 published herein an extremely influential review of the literature linking economics and elections what they called the vp functions in that work they offered a number of conclusions in proposition form about the state of the evidence in this field we present the key ones 16 in all and assess the extent to which they continue to hold in light of the new evidence about what has come to be known as economic voting as shall be shown nannestad and paldam were prescient in their early establishment of many of the principal results explaining how the economy moves the vote choice

understanding expectation driven fluctuations a labor market approach this paper presents a uni ed analysis of neoclassical models that can generate expectation driven business cycles under anticipated future technology shocks or news shocks it shows that the ability or inability of various rbc models to generate positive comovement of aggregate variables hinges crucially on the structure of the labor market equilibrium the analysis provides a simple and intuitive guide to understanding the existing literature and to searching for new models that can explain the data under news shocks

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

export instability and economic growth in sub saharan africa empirical research on the relationship between export instability and economic growth in less developed countries ldcs has yielded mixed results while some researchers find a negative relationship between export instability and economic growth others find a positive relationship a third group of researchers finds no significant relationship between export instability and economic growth in ldcs 1 those who find a negative relationship between export instability and economic growth in ldcs stress the negative effect export instability has on the supply of output through the generation of uncertainty in long term planning as well as due to shortages of inputs at critical times during the production process those who find a positive relationship between export instability and economic growth argue that ldcs respond to export instability by reducing consumption this process if repeated over a period of time increases savings and hence the rate of investment those who find no significant relationship between export instability and economic growth argue that ldcs are able to anticipate the fluctuations in export earnings and plan for such fluctuations hence instability in export earnings has no appreciable effect on economic growth c moran investigates the relationships between domestic savings rate and economic growth rate on the one hand and export instability on the other in a sample of ldcs 2 he finds that export instability has no significant long run impact on either domestic savings rate or economic growth rate however over relatively short periods of time export instability has a negative and significant effect on both savings and economic growth rate the negative effect occurs when the negative effects of price and of quantity fluctuations reinforce each other on the other hand when the negative effect of price fluctuations is counterbalanced by the effects of quantity fluctuations export instabil

a model of the political economy of the united states we develop and test a model of joint determination of economic growth and national election results in the united states the formal model which combines developments in the rational choice analysis of the behavior of economic agents and voters leads to a system of equations in which the dependent variables are the growth rate and the vote shares in presidential and congressional elections our estimates support the theoretical claims that growth responds to unanticipated policy shifts and that voters use both on year and midterm elections to balance the two parties on the other hand we find no support for rational retrospective voting we do reconfirm in a fully simultaneous framework the naive retrospective voting literature s finding that the economy has a strong effect on presidential voting we find congressional elections unaffected by the economy except as transmitted by presidential coattails

when can changes in expectations cause business cycle fluctuations in neo classical settings abstract it is often argued that changes in expectation are an important driving force of the business cycle however it is well known that changes in expectations cannot generate positive co movement between consumption investment and employment in the most standard neo classical business cycle models this gives rise to the question of whether changes in expectation can cause business cycle fluctuations in any neo classical setting or whether such a phenomenon is inherently related to market imperfections this paper offers a systematic exploration of this issue our finding is that expectation driven business cycle fluctuations can arise in neo classical models when one allows for a sufficiently rich description of the production technology however such a structure is rarely allowed or explored in macro models in particular we identify a multi sector setting and a setting with a costly distribution system in which expectation driven business cycles can arise

growth expectations undue optimism and short run fluctuations this paper proposes a two step procedure in order to identify belief shocks shocks to expectations about the current state of the economy first we use the survey of professional forecasters to me

globalization party positions and the median voter the authors argue that the effects of economic globalization on social democratic parties in western europe are conditional on the position of the median voter if the median is far enough to the right such parties will adopt business friendly policies because they are required to win office only when the median is relatively far to the left will globalization constrain social democratic parties forcing them to adopt policies further to the right in order to retain credibility it is on this basis the authors argue that empirical studies are misspecified unless they include an interaction between measures of globalization and the position of the median in addition to presenting formal theoretical arguments the article reports empirical findings from fifteen countries in the period from 1973 to 2002 that support the conclusion that the effects of globalization are indeed contingent on the median the authors find that the effects of globalization are significant for social democratic parties only in circumstances in which the median is relatively far to the left

real rigidities productivity improvements and investment dynamics abstract the theoretical literature on business cycles predicts a positive investment response to productivity improvements a prediction we question from theoretical and empirical perspectives we show that a short term negative response of investment to a positive technology shock is consistent with a reasonably parameterized new keynesian dynamic stochastic general equilibrium dsge model in which firm specific capital introduces an additional real rigidity and monetary policy is not fully accommodative employing bayesian techniques we provide evidence that permanent productivity improvements have short term contractionary effects on investment although this result can be obtained from both firm specific and rental capital models only in the case of the former is the average price duration in line with the microeconometric evidence

expectation traps and discretion abstract we develop a dynamic model with optimizing private agents and a benevolent optimizing monetary authority that cannot commit to future policies we characterize the set of sustainable equilibria and discuss the implications for institutional reform we show that there are equilibria in which the monetary authority pursues inflationary policies because that is what private agents expect we call such equilibria expectation traps alternative institutional arrangements for the conduct of monetary policy which impose limited forms of commitment on the policymaker can eliminate expectation traps journal of economic literatureclassification numbers e31 e42 e50 e51 e58

the expectational effects of news in business cycles evidence from forecast data abstract news shocks work through changes in expectations so data on expectations contain important information for identification of news shocks we demonstrate this by estimating a dsge model augmented with news shocks using u s data between 1955q1 and 2006q4 news shocks especially those with long anticipation horizons generate modest output fluctuations before fundamental changes the precision of the estimated news shocks greatly improves when data on expectations are used these results arise because data on expectations are smooth and do not resemble actual output

portfolio models and planning for export diversification malawi tanzania and zimbabwe evidence is presented regarding strengths and limitations of portfolio approaches as applied to diversifying export earnings an empirical application using data from malawi tanzania and zimbabwe is used to demonstrate these strengths and limitations modifications of the typical portfolio approach to export diversification are presented these modifications help make the approach more plausible for use in developing countries the modified approach is shown to provide guidance to policymakers who seek simultaneously to increase export earnings and reduce their instability

production growth and business cycles ii new directions abstract this paper outlines new directions for investigations of real business cycle models consideration of stochastic growth of exogenous and endogenous forms analysis of suboptimal outcomes arising due to externalities of distorting taxes and implications of labor market heterogeneity

room to move international financial markets and national welfare states a central research question in international political economy concerns the influence of financial markets on government policy outcomes to what extent does international capital mobility limit government policy choices i evaluate the relationship between international financial markets and government policy outcomes with a focus on the government bond market in developed democracies evidence includes interviews with financial market participants and a cross sectional time series analysis of the determinants of interest rates this evaluation suggests that governments of developed democracies face strong but narrowly defined financial market pressures financial market participants are concerned with a few macroeconomic policy indicators including inflation rates and government deficit gdp ratios but not with micropolicy indicators such as the distribution of government spending across functional categories in these areas governments retain policymaking autonomy i conclude by exploring the role of financial market influences within domestic politics and offering suggestions for further research

assessing the economic vulnerability of small island developing states and the least developed countries macro vulnerability of the small island developing states sids as well as of least developed countries ldcs has been an increasing concern for the international community this has led to the design of an economic vulnerability index evi to assess the structural economic vulnerability resulting from natural or external shocks we first explain how vulnerability affects growth development and poverty reduction particularly in small developing countries we then examine how the evi has been designed and how it can be used to compare sids and ldcs we argue that evi is a relevant tool not only for identification of ldcs but also for geographical aid allocation to favour vulnerable countries including ldcs and sids even though not all sids qualify as ldcs

sentiment and the u s business cycle abstract psychological factors are commonly believed to play a role on cyclical economic fluctuations but they are typically omitted from state of the art macroeconomic models this paper introduces sentiment in a medium scale dsge model of the u s economy and tests the empirical contribution of sentiment shocks to business cycle fluctuations the assumption of rational expectations is relaxed the paper exploits instead observed data on expectations in the estimation the observed expectations are assumed to be formed from a near rational learning model agents are endowed with a perceived law of motion that resembles the model solution under rational expectations but they lack knowledge about the solution s reduced form coefficients they attempt to learn those coefficients over time using available time series at each point in the sample and updating their beliefs through constant gain learning in each period however they may form expectations that fall above or below those implied by the learning model these deviations capture excesses of optimism and pessimism which can be quite persistent and which are defined as sentiment in the model different sentiment shocks are identified in the empirical analysis waves of undue optimism and pessimism may refer to expected future consumption future investment or future inflationary pressures the results show that exogenous variations in sentiment are responsible for a sizable above forty percent portion of historical u s business cycle fluctuations sentiment shocks related to investment decisions which evoke keynes animal spirits play the largest role when the model is estimated imposing the rational expectations hypothesis instead the role of structural investment specific and neutral technology shocks significantly expands to capture the omitted contribution of sentiment

an alternative explanation of the price puzzle abstract this paper proposes an explanation for the frequent appearance of a price puzzle in vars designed for monetary policy analysis it assumes that the data are generated by a model in which output and output gap are not equivalent while an econometrician follows the common practice of including only output in the var the omission of the output gap is shown to spuriously produce a price puzzle and several other incorrect conclusions in a class of commonly used models this can happen even if the model admits a triangular identification and if the forecasts produced by the misspecified var are optimal when the model is tested on us data all predictions are supported a commodity price index is not needed to solve the puzzle

self fulfilling expectations and the inflation of the 1970s evidence from the livingston survey abstract using survey data on expectations we examine whether the response of monetary policy to sudden movements in expected inflation contributed to the persistent high inflation of the 1970s the evidence suggests that prior to 1979 the fed accommodated temporary shocks to expected inflation which then led to persistent increases in actual inflation we do not find this behavior in the post 1979 data among commonly cited factors oil and fiscal shocks do not appear to have triggered an increase in expected inflation that eventually resulted in higher actual inflation

news driven business cycles insights and challenges there is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations the news view of business cycles offers a formalization of this perspective in this paper we discuss mechanisms by which changes in agents information due to the arrival of news can cause business cycle fluctuations driven by expectational change and we review the empirical evidence aimed at evaluating their relevance in particular we highlight how the literature on news and business cycles offers a coherent way of thinking about aggregate fluctuations while at the same time we emphasize the many challenges that must be addressed before a proper assessment of the role of news in business cycles can be established jel d83 d84 e13 e32 o33

the price puzzle reconsidered abstract a large literature has employed structural vector autoregressive svar models to investigate the empirical effects of u s monetary policy many of these models regularly produce a price puzzle a rise in the aggregate price level in response to a contractionary innovation to monetary policy unless commodity prices are included conventional wisdom maintains that commodity prices resolve the price puzzle because they contain information that helps the federal reserve forecast inflation i examine a number of plausible alternative indicator variables and find little correlation between an ability to forecast inflation and an ability to resolve the price puzzle additionally a sub sample investigation reveals that evidence of a price puzzle is associated primarily with the 1959 1979 sample period and that most indicators including commodity prices cannot resolve the puzzle over this period

does the time consistency problem explain the behavior of inflation in the united states abstract this paper derives the restrictions imposed by barro and gordon s theory of time consistent monetary policy on a bivariate time series model for inflation and unemployment and tests those restrictions using quarterly us data from 1960 through 1997 the results show that the data are consistent with the implications of the theory for the long run behavior of the two variables indicating that the theory can explain the initial rise and subsequent fall of inflation over the past four decades the results also suggest that the theory must be extended to account more fully for the short run dynamics that appear in the data

sources of agricultural productivity growth and stagnation in sub saharan africa this paper examines sources of agricultural growth in sub saharan africa growth in the stock of traditional inputs land labor livestock remains the dominant source of output growth growth in modern input use was of secondary importance but still accounted for a 0 2 0 4 annual growth rate in three of four sub regions econometric results support earlier studies that suggest that land abundance may be a constraint on land productivity growth growth in agricultural exports and historic calorie availability had positive impacts on productivity these latter results suggest that positive feedback effects exist between export performance and food security on one hand and agricultural productivity on the other

a new look at the effects of export instability on investment and growth abstract this paper is concerned with the effects of export instability on investment and growth it is shown that past cross sectional empirical studies on the effects of export instability either in prices or in value terms used an incorrect measure of instability that does not properly take account of the share of exports in gdp using a new instability index and a broad set of conditioning variables it is shown that export instability was positively associated with investment but negatively associated with growth in a large sample of countries during the period from the early 1970s to the mid 1980s

economic voting and multilevel governance a comparative individual level analysis an important component of incumbent support is the reward punishment calculus of economic voting previous work has shown that clarity of responsibility within the central state government conditions national economic effects on incumbent vote choice where clarity is high low economic effects are greater less this article advances the clarity of responsibility argument by considering the effect of multilevel governance on economic voting in institutional contexts of multilevel governance the process of correctly assigning responsibility for economic outcomes can be difficult this article tests the proposition that multilevel governance mutes effects of national economic conditions by undermining responsibility linkages to the national government individual level data from the comparative study of electoral systems module 1 are used to test this proposition results demonstrate that economic voting is weakest in countries where multilevel governance is most prominent findings are discussed in light of the contribution to the economic voting literature and the potential implications of multilevel governance

what are the macroeconomic effects of high frequency uncertainty shocks this paper evaluates the effects of high frequency uncertainty shocks on a set of low frequency macroeconomic variables that are representative of the u s economy rather than estimating models at the same common low frequency we use recently developed econometric models which allows us to deal with data of different sampling frequencies

a theory of demand shocks this paper presents a model of business cycles driven by shocks to consumer expectations regarding aggregate productivity agents are hit by heterogeneous productivity shocks they observe their own productivity and a noisy public signal regarding aggregate productivity the public signal gives rise to noise shocks which have the features of aggregate demand shocks they increase output employment and inflation in the short run and have no effects in the long run numerical examples suggest that the model can generate sizable equilibrium dsge models of the business cycle include a large number of shocks to technol ogy monetary policy preferences etc but typically do not include expectational shocks as independent drivers of short run fluctuations 1 this paper explores the idea of expectation driven cycles looking at a model where technology determines equilibrium output in the long run and consumers receive noisy signals about technology in the short run the presence of noisy signals produces expectational errors this paper studies the role of these expectational errors in gener ating volatility at business cycle frequencies the model is based on two ingredients first consumers take time to recognize permanent changes in aggregate fundamentals although they may have good information on the current state of the individual firm or sector where they operate they have only limited information regarding the long run determinants of aggregate activity second consumers have access to public information that is relevant to estimate long run productivity this includes news about technological innovations publicly released macroeconomic and sectoral statistics financial market prices and public statements by policy makers however these signals provide only a noisy forecast of the long run effects of technological innovations this opens the door to noise shocks which induce consumers to temporarily overestimate or underestimate the productive capacity of the economy

anticipated growth and business cycles in matching models in a business cycle model that incorporates a standard matching framework employment increases in response to news shocks even though the wealth effect associated with the increase in expected productivity reduces labor force participation the reason is that the matching friction induces entrepreneurs to increase investment in new projects and vacancies early if there is underinvestment in new projects in the competitive equilibrium then the efficiency gains associated with an increase in employment make it possible that consumption employment output as well as the investment in new and existing projects jointly increase long before the actual increase in productivity materializes if there is no underinvestment then investment in existing projects decreases but total investment consumption employment and output still jointly increase

voting in open economies the electoral consequences of globalization what are the electoral consequences of global market integration although recent discussions of politics and markets have much to say on globalization s implications for policy outcomes the impact of market integration on representative democracy has received scant attention this article addresses this omission we extend the globalization literature to develop two competing hypotheses regarding the influence of open economies on electoral accountability predictions are tested using a new data set covering elections from 75 countries over 27 years results support a government constraint hypothesis exposure to the world economy weakens connections between economic performance and support for political incumbents by redirecting concerns from the policy implications of globalization and toward its electoral consequences findings highlight the influence of voter perceptions and of vote seeking politicians in the politics of globalization

economic growth in africa abstract this paper draws on the recent endogenous growth methodology to study the factors behind differences in per capita growth rates across africa the results indicate that various economic factors including initial conditions investment population growth trade orientation inflation financial development and the growth of the government sector contribute significantly to economic growth in addition to economic variables we find the degree of political freedom to be a significant contributor to economic growth finally we find some evidence that economic growth by the members of the cfa franc zone has not fared well in comparison to other african countries

oil shocks and aggregate macroeconomic behavior the role of monetary policy a recent paper by bernanke gertler and watson 1997 suggests that monetary policy could be used to eliminate any recessionary consequences of an oil price shock this paper challenges this conclusion on two grounds first we question whether the federal reserve actually has the power to implement such a policy for example we consider it unlikely that additional money creation would have succeeded in reducing the fed funds rate by 900 basis points relative to the values seen in 1974 second we point out that the size of the effect that bernanke gertler and watson attribute to oil shocks is substantially smaller than that reported by other researchers primarily due to their choice of a shorter lag length than that used by other researchers we offer evidence in favor of the longer lag length employed by previous research and show that under this specification even the aggressive federal reserve policies proposed would not have succeeded in averting a downturn