competing macro hypotheses in the united states a kalman filtering approach the empirical validity of alternative views about the short run determinants of real output growth in the united states is investigated a nested framework is used to test the macro rational expectations mre hypothesis directly against two competing hypotheses the neo keynesian view that anticipated and unanticpated monetary policy both matter and friedman s 1977 proposition that increased inflation uncertainty reduces real output at least temporarily the unobservable explanatory variables are obtained from time varying parameter models of inflation and money growth which generate forecast errors and their conditional variances consistent with rational expectations under a continuously chaning policy regime the empirical results strongly support friedman s view the mre hypothesis must be rejected since both anticipated and unanticipated monetary changes matter the results prove robust across different model specifications and estimation techniques

a little bit more evidence on the natural rate hypothesis from the u k abstract the evidence for the neutrality of anticipated changes in monetary policy in the u k over the period 1963q1 1982q1 is examined breaks in the stochastic process generating the money stock are used to identify the model the results are generally unfavourable to the proposition that only unanticipated money matters

the holmes smyth effect some preliminary exercises with the uk demand for narrow money the primary purpose of this paper is to test a plausible data coherent representation of the consumption based model of the demand for money against and analogus representation of the standard income based formulation on the basis of non nested tests neither model canbe maintained consequently the possibility of tax cuts being contractionary the holmes smyth effect is still an open question

on the policy ineffectiveness proposition and a keynesian alternative a rejoinder i the basis of rush and waldo s rw results is the introduction of a war dummy variable in the dg equation this is however difficult to justify in the context of a rational expectations model under incomplete learning wars by their very nature are unique events and it is not clear how the public are supposed to learn the quantitative effects that the ending of three totally different wars may have had upon the growth of real government expenditure the fact that in i946 the public knew that world war ii was over does not mean that they could also estimate its precise quantitative effect on government expenditure rw estimate their dg equation using data for the whole of the period i943 73 and i943 85 thus implicitly assuming that all these data were available to the public in i946 for the computation of the coefficient of the war dummy in the dg equation but in i946 the public could not possibly have known about the timing and the intensities of the korean or the vietnam wars the assumption of complete learning that underlies the rational expectations hypothesis in general and rw s version of the nc model in particular is especially troublesome when the model contains dummy variables that correspond to unique events

ethnic networks and access to credit evidence from the manufacturing sector in kenya it is often anecdotally observed that networks can facilitate exchange but there are few empirical studies that explore the significance of such networks in this paper the authors analyze the impact of ethnic networks on access to finance of kenyan firms using an exceptionally rich data set the authors find that ethnicity does not affect access to formal sources of finance but being a member of an ethnic group is significant in explaining access to informal sources of finance like supplier credit the authors interpret these results in terms of information and contract enforcement mechanisms that work within ethnic groups but not across them

a bayesian view of nominal money and real output through a new classical macroeconomic window this study investigates the empirical evidence on the effects of unanticipated changes in nominal money on real output in 47 countries when viewed through a window i e likelihood function that assumes the neutrality of anticipated changes using a bayesian predictivist approach it provides a pedagogical bayesian analysis of generated regressor models in the face of specification uncertainty involving among other things multiple unit roots and trend stationary alternatives

neopatrimonialism and the political economy of economic performance in africa critical reflections during the past two decades neopatrimonialism has become the convenient all purpose and ubiquitous moniker for african governance the school of thought behind this research program which the author refers to as the neopatrimonialism school has produced an impressive literature on africa its analysis informs policymakers and its language permeates media reportage on african states while neopatrimonialism has long been a focus of development studies in recent times it has assumed politically and economically exigent status the school identifies causal links between neopatrimonialism and economic performance and makes predictions drawing from what is referred to as the logic of neopatrimonialism neopatrimonialism is said to account for trade policies hyperinflation economic stagnation low investment in infrastructure urban bias andultimately the lack of economic development in africa this article examines the empirical basis of predictions and policy prescriptions it argues that while descriptive of the social practices of the states and individuals that occupy different positions within african societies the concept of neopatrimonialism has little analytical content and no predictive value with respect to economic policy and performance

a non nested test of the new classical neutrality proposition for canada this paper uses a non nested testing technique to test the neutrality proposition of the new classical economics a new classical model and an alternative model are estimated and tested against each other the test results indicate that the alternative model rejects the new classical model and that the neutrality proposition cannot be supported empirically

a critique of the proposed tests of the natural rate rational expectations hypothesis the failure of the governments of most industrialised countries over the past decade to deal successfully with the problems of rising unemployment and high and often accelerating rates of price and wage inflation has revived interest in the pre keynesian macro economics of sound money and has renewed the controversy of the 1930 s over what governments should or should not do if they wish to achieve full employment with reasonable price stability in democratic societies keynesian economics has come under attack both by those who primarily oppose interventionist policies on ideological grounds and by the so called new classical macro economists who adhere to the natural rate of unemployment hypothesis nrh advanced by phelps i967 and friedman i 968 and the hypothesis of rational formation of expectations reh originally due to muth i96i armed with this joint natural rate rational expectations nr re hypothesis the new classical macro economists have argued that in a world capable of being represented by linear or log linear relations with a unique and stable equilibrium and no information discrepancy between the government and the private sector no government macro economic policy whether monetary or fiscal no matter how ingeniously formulated and how effectively implemented can have any systematic or lasting impact upon the level of output or the rate of unemployment 2 clearly this fundamental policy

rent seeking and resource booms abstract this paper develops a model of rent seeking in which the opportunity cost of rent seeking is foregone entrepreneurship it provides conditions under which resource booms tend to lead to an increase in rent seeking activity and those in which they induce entrepreneurship we identify an important difference between the two activities which leads resource booms to bias gains in favour of rent seeking over entrepreneurship but we also show that this bias depends on the nature of the initial equilibrium

why do some resource abundant countries succeed while others do not on average resource abundant countries have experienced lower growth over the last four decades than their resource poor counterparts but the most interesting aspect of the paradox of plenty is not the average effect of natural resources but its variation for every nigeria or venezuela there is a norway or a botswana why do natural resources induce prosperity in some countries but stagnation in others this paper gives an overview of the dimensions along which resource abundant winners and losers differ in light of this it then discusses different theory models of the resource curse with a particular emphasis on recent developments

the effects of natural resources on urbanization concentration and living standards in africa summary this paper examines the effects of natural resource abundance on urbanization and living standards in africa our central hypothesis is that the exploitation of natural resources in a context of poor governance quality creates the conditions for rapid urbanization and urban concentration and ultimately lowers living standards in primal cities using a large panel of african countries our results show that an increase in the share of natural resources leads to a rapid increase in urbanization and urban concentration even after taking into account endogeneity issues or after using more exogenous measures of resource dependency the paper also establishes a negative association between the resource abundance the quality of life in large cities and the degree of informality via the increase in urbanization rate and urban concentration importantly we have established that these results mostly hold in the context of bad governance more specifically the resource led urbanization and concentration booms take place mainly in countries characterized by poor governance records furthermore poor governance quality is associated with a more detrimental effect of urbanization and urban concentration on the quality of life in african cities these results suggest that ongoing transformations experienced by these countries call for complementary policies to ensure a more balanced and efficient urbanization process

the impact of ethnic diversity on microenterprise start ups until recently factors determining the decisions made by microfinance institutions mfis to extend loans to business start ups had not been explored recent evidence shows that mfi performance wi

the scourge of the monetarists kaldor on monetarism and on money nicolas kaldor s critique of monetarism from 1970 until his death is described and evaluated it is argued that subsequent events as well as empirical research vindicate his critique kaldor s critique of john maynard keynes s monetary theory is then seen as an extension of his radcliffe views and this paper argues that in this matter kaldor was mechanical in his modeling of the endogeneity of money supply it is suggested that the work of hyman minsky and victoria chick has the potential for further work in this area copyright 1989 by oxford university press

unit root hypothesis new classical and keynesian models abstract following perron econometrica 1989 57 1361 1401 the variables in the new classical and keynesian output equations are shown to be trend stationary therefore these models are evaluated for the united states with the standard non nested hypothesis tests the majority of these tests have rejected the new classical in favour of the keynesian approach

natural resource abundance and human capital accumulation summary this paper studies the link between resource abundance and human capital accumulation it reviews the commonly used indicators of resource abundance and human capital accumulation the case for a form of resource curse in human capital accumulation is not robust to reasonable changes in these indicators in fact subsoil wealth and resource rents per capita are shown to be significantly correlated with improved indicators of human capital accumulation if mineral wealth is what authors have in mind when they refer to natural resource abundance then they should choose indicators that measure this concept as accurately as possible

optimal labour contracts under asymmetric information an introduction the review of economic studies has instituted a new series of lectures to be given annually by a younger british economist at the association of university teachers of economics meetings the choice of lecturer is determined by a panel whose members are currently professors hahn mirrlees and nobay this paper is a revised version of the first lecture in the series it was presented at the aute meeting held at the university of surrey in april 1982 and was refereed in the usual way mak

internal borders ethnic based market segmentation in malawi summary ethnic diversity is associated with poorer economic development but why i argue that market segmentation is one mechanism linking diversity to economic underdevelopment when ethnic groups are geographically segregated and trust is concentrated within groups markets will be tend to be segmented along ethnic lines i evaluate this argument using maize price data from seventy malawian markets over 14 years and combine it with census data on the spatial distribution of ethnic groups i find that maize price differences a key indicator of market segmentation are indeed larger for ethnically dissimilar markets even after taking sub national administrative borders geographic barriers and climatic differences into account these statistical findings are complemented by interview data from farmers and traders in three markets across malawi which highlight the centrality of trust in small scale maize trading as well as a preference for coethnic trading partners together these findings suggest that ethnic diversity and ethnoregional segregation in particular can have a negative impact on market integration an important driver of food security and long term economic development

oil governance and the mis allocation of talent in developing countries this paper sheds light on the relationship between oil rent and the allocation of talent toward rent seeking versus more productive activities conditional on the quality of institutions using a sample of 69 developing countries we demonstrate that oil resources orient university students toward specializations that provide better future access to rents when institutions are weak the results are robust to various specifications datasets on governance quality and estimation methods oil affects the demand for each profession through a technological effect indicating complementarity between oil and engineering manufacturing and construction however it also increases the size of the cake therefore when institutions are weak oil increases the incentive to opt for professions with better access to rents law business and the social sciences rather than careers in engineering creating a deviation from the optimal allocation between the two types of specialization

oil growth and health what does the cross country evidence really show we show that previous results from the body of literature on the resource curse have primarily been driven by the collapse in oil prices during the mid 1980s by exploiting cross country variations in the size of initial oil endowments and the timing of oil discoveries we find that there is a stable positive relationship between oil abundance and long run economic growth using dynamic panel data methods we also find that there is no evidence that higher oil rents hinder growth however to focus on material gain means that the welfare gain from oil is understated because oil rich countries benefit more by the reduction in infant mortality and the gain in longevity interestingly such oil led health improvements are more pronounced in non democratic countries where initial heath conditions were poor and oil wealth is concentrated among the ruling elites

the short run relation between growth and inflation in latin america reply sebastian edwards uses a new unexpected money variable based on the addition of the contemporaneous fiscal deficit to my autoregressive money growth equations to argue that 1 in brazil and chile there is no significant relationship between unexpected money growth and output growth 2 unexpected money growth has different estimated effects on output in colombia peru and mexico and these effects substantially exceed those estimated in brazil and chile and 3 thus my 10 percent rule for the effect of unexpected money growth on output growth does not hold in addition edwards incorporates the terms of trade in his output equations and finds they are important in the case of chile and mexico finally edwards takes issue with my use of lagged inflation to explain output edwards and i use somewhat different data not only in terms of sources but also edwards often uses m2 rather than ml in reporting his best results however edwards and my basic results are broadly similar compare his table 1 and my original tables 1 and 4 this is encouraging and in general makes it seem not worth quibbling over the differences in data however there is one difference which affects the results that i will discuss later the inclusion of the fiscal deficit in the money growth equation is a key difference in our work as i pointed out in my earlier article fiscal and monetary policy often are closely related in latin america thus it is not surprising that edwards finds the deficit divided by lagged money is a significant factor in explaining money growth however the point is not to explain money growth but to estimate a relationship which the public could have been using to predict how much money and thus nominal aggregate demand has grown since the last observation on the money stock 2 it strains credulity to assume that in latin america the budget deficit could be used by the public to estimate money growth contemporaneously data on the cash deficit usually are available publicly only with a long lag moreover many alternative versions of a deficit involving creative accounting methods are reported for example for many years in colombia the reported deficit which is available with about a one quarter lag treated both the unspent portion of the budget and the accounting profits from the revaluation of the local currency value of exchange reserves as income procedures which caused great confusion inside as well as outside the government despite such problems the cash deficit still might be useful as a monetary growth predictor for example it may be correlated with some other easily available contemporaneous indicator of money growth however its usefulness can best be judged from a comparison of the results when the deficit is used only as the money growth predictor to determine unexpected money a constrained equation with those obtained when it is used as an additional independent variable an unconstrained equation a test robert barro has suggested in another context world bank the views and interpretations expressed in this article are my own and should not be attributed to the world bank its affiliated organizations or to any individual acting in their behalf edwards also uses the seemingly unrelated regression technique to take into account possible interrelationships in the error terms across countries judging from the reported t statistics this procedure did not improve the fits greatly 2surprisingly the deficit is not significant in explaining domestic credit in mexico this result and the estimated negative relationship between edwards domestic credit series and output suggest a problem in the domestic credit variable

fractionalization entrepreneurship and the institutional environment for entrepreneurship the vast majority of the literature on ethnicity and entrepreneurship focuses on the construct of ethnic entrepreneurship however very little is known about how ethnic heterogeneity affects entrepreneurship and the institutional arrangements affecting entrepreneurship this study attempts to fill the gap and thus examines the effect of ethnic heterogeneity on various outcomes associated with entrepreneurship and the institutional environment for entrepreneurship using indices of ethnic and linguistic fractionalization we show that ethnic heterogeneity negatively influences entrepreneurship we argue that potential channels that can explain the negative effect of fractionalization on entrepreneurship include trust social network and innovation among others this study provides a new perspective on the existing debate that seeks to understand why the levels of entrepreneurial success vary across countries

the voracity effect abstract we analyze an economy that lacks a strong legal political institutional infrastructure and is populated by multiple powerful groups powerful groups dynamically interact via a fiscal process that effectively allows open access to the aggregate capital stock in equilibrium this leads to slow economic growth and a voracity effect by which a shock such as a terms of trade windfall perversely generates a more than proportionate increase in fiscal redistribution and reduces growth we also show that a dilution in the concentration of power leads to faster growth and a less procyclical response to shocks jel f43 o10 o23 o40

the relevance of unanticipated money growth in explaining output variation this paper tests a reduced form equation in which real gnp for the united states is explained by deviations of multi period m1 growth rates from ex ante expectations of those rates formed from one to eight quarters earlier the theoretical model is suggested by stanley fischer s 1977 article and may be thought of as a new keynesian model the equations are tested in both level and first difference specifications to allow for possible unit roots empirical results strongly support this model in preference to new classical and keynesian alternatives ex ante expectations or m1 growth are formed from multi period forecasts made by chase econometrics inc between 1970 and 1979

does oil corrupt evidence from a natural experiment in west africa abstract this paper explores the oil discovery announcements in sao tome and principe 1997 1999 to assess the role of natural resources in determining corruption for this purpose we use a natural experiment framework which contrasts sao tome and principe to cape verde a control west african country sharing the same colonial past and important recent economic and political shocks our measurement is based on tailored household surveys we conducted in both island countries the unique survey instrument was retrospective and used personal histories to elicit memories from the respondents we analyze changes in perceived corruption across a wide range of public services and allocations we find clearest increases on vote buying education namely in the allocation of scholarships and customs ranging from 31 to 40 of the subjective scale we interpret these findings as symptoms of increased competition for core state resources

ethnicity and credit in african manufacturing abstract this paper investigates whether market interaction can by itself perpetuate the lack of ethnic diversity that is observed in the business communities of many developing countries using case study data on manufacturing firms in kenya and zimbabwe we find no evidence that blacks or women are disadvantaged in the attribution of bank credit once we control for firm size and other observable characteristics in contrast an ethnic and gender bias is noticeable in the attribution of supplier credit although we cannot rule out the presence of discrimination the bulk of the evidence indicates that network effects play an important role in explaining this bias

corruption perceptions vs corruption reality abstract this paper examines the accuracy of corruption perceptions by comparing indonesian villagers reported perceptions about corruption in a road building project in their village with a more objective measure of missing expenditures in the project i find that villagers reported perceptions do contain real information and that villagers are sophisticated enough to distinguish between corruption in a particular road project and general corruption in the village the magnitude of the reported information however is small in part because officials hide corruption where it is hardest for villagers to detect i also find that there are biases in reported perceptions the findings illustrate the limitations of relying solely on corruption perceptions whether in designing anti corruption policies or in conducting empirical research on corruption

non nested tests of new classical versus keynesian models further evidence this paper re runs the experiment conducted by dadkhah and valbuena 1985 using data generated by the australian canadian japanese swiss and swedish economies the aim of this exercise is to discriminate between new classical and keynesian accounts of the business cycle the results obtained in the present study are broadly supportive of dadkhah and valbuena s earlier findings in that the keynesian model generally outperforms the new classical alternative

econometric issues in macroeconomic models with generated regressors the paper critically reviews the literature on the econometric issues raised by the use of generated regressors gr in empirical models the economic rationale for the use of gr is considered with examples being drawn from several macroeconomic examples including new classical macroeconomic ncm models which postulate monetary neutrality various estimation methods are discussed for models which include surprise or unexpected terms and the strengths and weaknesses of each approach are investigated drawing upon the work of mcaleer and mckenzie 1991 situations where the typically inefficient two step estimation 2se method will be efficient are highlighted problems of model misspecification and measurement errors are also investigated an empirical section highlights some of the dangers of using uncorrected 2se estimation results through a careful consideration of many recent attempts to test the ncm monetary neutrality hypothesis copyright 1993 by blackwell publishers ltd

the colonial origins of comparative development an empirical investigation comment abstract acemoglu johnson and robinson s 2001 seminal article argues property rights institutions powerfully affect national income using estimated mortality rates of early european settlers t

natural resources education and economic development economic growth since 1965 has varied inversely with the share of natural capital in national wealth across countries four main channels of transmission from abundant natural resources to stunted economic development are discussed a the dutch disease b rent seeking c overconfidence and d neglect of education public expenditure on education relative to national income expected years of schooling for girls and gross secondary school enrolment are all shown to be inversely related to the share of natural capital in national wealth across countries natural capital appears to crowd out human capital thereby slowing down the pace of economic development

monetarism and the aggregate economy some longer run evidence a simple macro model is used to investigate various monetarist propositions over the period 1923 82 initial tests indicate a structural break over this period and the subperiods 1923 60 and 1961 82 are analyzed separately results obtained for the latter period support the monetarist propositions put forward by stein and others however upon closer investigation it appears that the crucial long run neutrality that characterizes these findings is essentially generated by government policy and is not necessarily an intrinsic property of the economy over that period by contrast results obtained for the period 1923 60 are much less supportive of these same propositions

institutions and the resource curse countries rich in natural resources constitute both growth losers and growth winners we claim that the main reason for these diverging experiences is differences in the quality of institutions more natural resources push aggregate income down when institutions are grabber friendly while more resources raise income when institutions are producer friendly we test this theory building on sachs and warner s influential works on the resource curse our main hypothesis that institutions are decisive for the resource curse is confirmed our results contrast the claims of sachs and warner that institutions do not play a role

a quarterly model of unanticipated monetary growth output and the price level in the u k 1963 1978 abstract this paper develops and estimates using quarterly data from 1963 to 1978 a three equation model of the u k economy in which output is affected only by unanticipated monetary growth whereas the price level is influenced by both anticipated and unanticipated changes in the money supply expectations of monetary growth are assumed to be muth rational the model was estimated using efficient procedures and tests of the over identifying restrictions were favourable to the model specification in particular anticipated monetary growth was found to have no significant effect on output

are devaluations contractionary recently a number of authors have criticized the role of devaluations in traditional stabilization programs it has been argued that contrary to the traditional view devaluations are contractionary and generate a decline in aggregate output in spite of the renewed theoretical interest in the possible contractionary effects of devaluations the empirical evidence on the subject has been quite sketchy in this paper the khan and knight 1981 model is extended to empirically address the issue of contractionary devaluations the extended model considers the effect of money surprises fiscal factors terms of trade changes and devaluations on the level of real output the results obtained using a variance components procedure on data for 12 developing countries provide some support to the short run contractionary devaluation hypothesis the results obtained indicate that in the short run a devaluation will generate a decline in aggregate output it is also found that after one year a devaluation will have an expansionary effecton output the evidence suggests that in the long run devaluations will have no effect on output this abstract was borrowed from another version of this item

a model of income unemployment and inflation for the usa a simple three equation macroeconomic model is developed to explain the dynamics of output umemployment and inflation for the usa the model is estimated with the annual data for 1946 1989 insights gained through some recent developments are used to specify and estimate the model

competitive models with keynesian features the notion of an equilibrium with quantity rationing has been with us for a long time in a rudimentary form it was found in all those early keynesian models which explained unemployment by positing a fixed money wage the advantage of the more recent disequilibrium theory models apart from ushering in a degree of rigour undreamt of in earlier days is that they explain how the firm comes to be off its supply curve with a fixed money wage but flexible prices the level of employment is determined by the marginal productof labour curve which is the firm s competitive demand for labour curve an increase in employment can only be obtained at the cost of a fall in the real wage much as the classical economists had insisted if there is quantityrationing in the goods market however an increase in demand resulting from increased government expenditure say will increase demand for labour without a change in the real wage and this initial increase in employment and income will have multiplier effects just as in the original keynesian stories while all prices remain fixed this is the economic importance of the innovation suggested by clower 1965 and developed by barro grossman 1971 benassy 1975 and grandmont laroque 1977 but the key assumption that prices are fixed or at least predetermined or determined exogenously to the model is also the weakest point of the theory it has two chief defects first there are too many equilibria for any arbitrarily given vector of prices there exists an equilibrium with quantity rationing without a theory to tell us how prices are determined the model has only weak predictive power second without a theory of price setting there is no explanation of how and when prices change and hence there is no way of saying in what sense a fix price equilibrium is an equilibrium whether these states are persistent or merely transitory is clearly crucial to the theory if the fixprice assumption is taken to mean as it often is that over a sufficiently short time period prices may be treated as approximately fixed then the theory runs the risk of being tautologous and not being taken seriously this sort of consideration appears to be what motivated oliver hart 1982 to take a rather different approach his starting point was the observation that the most important part of keynesian economics was the role it assigned to economic policy and not a particular model of the keynesian economy he therefore devised a model of imperfect competition which generated the traditional keynesian conclusions about the impact of economic policy without appealing to the fix price assumption for example under certain assumptions the government deficit multiplier is given by the usual formula 17

broken chain agoa and foreign direct investment in the kenyan clothing industry drawing upon survey and interview research covering 23 of an estimated total of 35 clothing manufacturing establishments operating in kenya as well as interviews with the policy community this paper examines the local economic development impacts associated with the recent agoa prompted re birth of the clothing industry in kenya just after its recent high watermark in 2003 it provides evidence of the characteristics of these manufacturing establishments as well as evidence of the multiple and interconnected failures on the part of government parent companies agents and customers to promote the longer term sustainability of the industry as such it provides further case study evidence of africa s uniquely problematic incorporation into global commodity chains

non nested tests of three competing theories of business cycles this paper tests the keynesian new classical and real business cycle theories against each other as non nested hypotheses using quarterly data for the us covering the period 1959 1 1989 2 the results indicate that no one theory stands out as the dominant explanation of the business cycle this contrasts with the findings of earlier work which is mostly concerned with testing the keynesian against the new classical theory we find that the introduction of a third theory the real business cycle theory which accounts of real factors blurs the distinction between the demand sided keynesian and the new classical theories

governance and renewable energy investment in mena countries how does trade matter abstract the middle east and north africa mena countries have recently developed renewable energy re markets however their rate of investment in renewable energy remains small compared to other regions in the world despite their relatively abundant endowments particularly in wind and solar while the literature identifies some barriers to investment in renewable energy we assume that the investment of mena countries could be impeded by specific governance factors furthermore we consider recent literature showing that trade openness reduces the negative effects of weak governance in this paper we empirically investigate the link between governance openness and renewable energy investment in the mena region using panel data for 15 mena countries over the period 1996 2013 our results prove that high institutional quality is associated with re investment in mena countries in addition this relationship seems to be conditional on the trade regime our results are robust to several measures of renewable energy investment and governance as well as to an alternative econometric set up

the policy ineffectiveness proposition some further tests abstract this study investigates for denmark the relative merits of the new classical versus the monetarist hypotheses regarding the role of monetary policy in stabilizing real economic activity the results do not reject the monetarist contention that anticipated systematic monetary policy has a significant effect on real output in the short run a finding that is inconsistent with the new classical policy ineffectiveness proposition

the failed africanization of commerce and industry in kenya abstract in the 1970s a number of authors challenged the dependency perspective with respect to kenya they maintained that a viable domestic capital class nurtured by state sponsorship had emerged since independence this article questions the revisionist interpretation of state business relations in kenya kenya does possess a dynamic entrepreneurial sector led mainly by kenyan indians government efforts to aid african entrepreneurs or to establish a vigorous state capitalist sector have been ineffective this is evident from surveys of the state enterprise sector private manufacturing and commerce revisionist authors tended to overestimate the capacity of kenyan state agencies to implement policy goals and they neglected the political context of africanization as an instrument of ethnic patronage for state leaders

more oil less democracy evidence from worldwide crude oil discoveries this article exploits variations in the timing and size of oil discoveries to identify the impact of oil wealth on democracy i find that discovering 100 billion barrels of oil approximately the initial endowment of iraq pushes a country s democracy level almost 20 percentage points below trend after three decades the estimated effect is larger for oilfields with higher quality oil and lower exploration and extraction costs however the estimates become less precise when oil abundance is measured by oil discovery per capita suggesting politicians may care about the level instead of the per capita value of oil wealth

does anticipated monetary policy matter an econometric investigation a heated debate has arisen over the policy ineffectiveness proposition associate with the work of lucas sargent and wallace it postulates that anticipated aggregate demand policy will have no effect on business cycle fluctuations so that one deterministic feedback policy rule is as good as any other from the point of view of stabilizing the economy this paper develops a methodology for empirically analyzing rational expectations models displaying this neutrality result and then applies it to the important question of whether anticipated monetary policy matters to the business cycle

a model of imperfect competition with keynesian features the recent literature on the reappraisal of keynes has viewed keynesian equilibria as arising when prices are fixed and effective demands and supplies are equilibrated through the adjustment of quantities one problem with this approach is that it lacks a theory of price determination in particular of why prices are fixed in the present paper we show that a number of keynesian features arise in a model in which prices are fully flexible but where agents have some monopoly power one advantage of this approach is that it provides a theory of the determination of both prices and quantities

on the policy ineffectiveness proposition and a keynesian alternative one of the most controversial macroeconomic developments of the last decade has been the rise of the so called new classical nc approach to macroeconomic theory and policy lucas i972 sargent and wallace i975 and barro i 976 have presented models which combine the friedman i968 phelps i970 natural rate theory with assumptions of market clearing and rational expectations as is well known these models deliver the striking result that the mean values of real variables cannot be affected by the government s monetary policy the publication of the theoretical work establishing the impotency result led to much empirical testing of the nc models one of the most successful approaches from the point of view of nc advocates is contained in a series of papers by barro i977 i978 i98i barro and rush i980 and rush i986 recently pesaran i982 has questioned barro s results and claimed that once an implausible assumption is discarded barro s work can be rejected in favour of a keynesian alternative because pesaran has put forth an explicit counter model to barro s work his results are potentially quite important this paper examines in detail pesaran s work and conclusions

the nature of the adas model based on the islm model the aggregate demand and supply model adas is interpreted as a synthesis of the keynesian and neoclassical models it uses the islm model without explaining its nature to derive aggregate demand ad it is combined with an aggregate supply as curve to explain price inflation and output dynamics this paper argues that neither the ad nor as curve is conceptually the same as its microeconomic counterpart and adas is not a synthesis in fact adasimplies that discretionary policy is necessary and that price changes do not perform their traditional negative feedback function

modelling price expectations an important difference between policy prescriptions based on different macroeconomic models relates to the way in which expectations are modelled in turn different approaches to expectations formation can be characterized in terms of the information available to agents and thus it becomes important to look at as many dimensions of the information set as possible because of the paucity of direct information on expectations many studies have concentrated on the few series of this nature which are available of paramount importance here is the livingston survey data on consumer price expectations however it is argued here that much previous work using these data is flawed through an inadequate consideration of the frequency on which expectations are formed and the information on which they are based

on the robustness of barro s new classical unemployment model in this paper the robustness of barro s new classical model of unemployment is examined using both two and three equation systems to various sample periods and methods of estimation the methods of estimation used are two step ols two step ols with correct standard errors using the same and different numbers of observations for the expectations and structural equations full information maximum likelihood and four novel variants of the computationally intensive parametric bootstrap method not surprisingly the empirical results for barro s model change according to the sample period chosen the different methods of estimation and the different ways of computing the covariance matrix for purposes of inference however the empirical results and inferences are generally robust to variations in any or all of these options

increasing returns and the foundations of unemployment theory current approaches to macroeconomic theory divide roughly into two basic schools of thought one approach typically associated with rational expectations views the economy as basically at or near walrasian market clearing equilibrium in which case it becomes very difficult to explain away convincingly the undeniable persistence at times of involuntary unemployment another approach views the underemployed economy as being in a state of temporary fixed price disequilibrium in which case aside from having to repress suspicions that the essence of effective demand failure might not have to do with prices fixed at wrong values there is a lot of rationalising to be done about why profitable adjustments are so slow this paper argues that something like an internally consistent theory of steady state involuntary unemployment is possible and even plausible the cornerstone of this third approach is increasing returns to scale which blocks unemployed agents from breaking out of a low level equilibrium trap unless there is overall coordination or stimulation a simple model is presented which contains the basic ideas

migration as an antidote to rent seeking abstract we develop a new mechanism through which skilled migration may influence economic performance in the sending country if agents can choose between acting as rent seekers and engaging in productive activities and only productive skills are exportable a positive probability of migration to a more secure economy reduces the relative expected returns from rent seeking thus decreasing the proportion of skilled workers who opt for parasitic activities such an improvement in the allocation of talent may prevail over the loss of skilled workers due to outmigration however we show that this result is not robust to the introduction of endogenous protection if productive workers share their resources between accumulation of productive capital and investment in security prospective migration may induce a weaker protection against rent seeking which in turn might depress average income in the source economy

forecasting rational expectations and the phillips curve an empirical investigation abstract the rational expectations version of the phillips curve is empirically evaluated for switzerland using a wide variety of specifications it turns out that the results are highly sensitive to measurement of both the natural rate and expectations of nominal variables no reliable phillips curve seems to exist in addition information on the relative quality of different forecasting schemes is obtained for a number of important macroeconomic variables

unanticipated money growth and unemployment post sample forecasts in the late 1970s robert j barro published what has since become a popular model of business fluctuations barro s 3 findings provide evidence advocating the short run neutrality of money under rational expectations forging an important empirical link to the theoretical studies of lucas 19 20 and sargent and wallace 33 the original barro unemployment model has received additional support from further statistical testing 5 6 15 despite criticisms and modifications some of which are considered in barro s 6 updated model these equations have inspired numerous empirical studies analyzing unanticipated effects of macroeconomic variables this paper examines post sample forecasts of barro s original 3 and revised 6 unemployment equations for the 1974 84 period mayer 23 24 harvey 13 179 80 and lovell 18 among many contend that the ability to successfully forecast outside of the sample period is an important criterion for evaluating model robustness this view is also reflected in a substantial body of studies including 10 25 26 29 39 which investigate the post sample predictive performance of macroeconomic models one year ahead forecasts indicate that the barro 3 6 equations accurately predict unemployment for the 1974 79 period during 1980 84 however the predictive performance of both models sharply deteriorates augmenting the barro models with interest rate volatility in accordance with the findings of evans 11 and tatom 38 considerably improves the overall forecasting ability this modification also rectifies the 1980s structural instability of the barro unemployment equations furthermore the basic conclusions of the seminal barro work are retained with this augmented model the results reveal that increases in interest rate volatility exert significantly adverse effects upon unemployment corroborating with the findings of evans 11 and tatom 38 still interest rate volatility could be overlooked in previous estimations of the barro or other models of business fluctuations due to the variable s relative constancy prior to 1979

mining away the preston curve summary i estimate the long term national health and education impacts of having a larger mining share in the economy by instrumenting the relative size of the mining sector with the natural geological variation in countries fossil fuel endowments i provide evidence suggestive of a causal relationship the findings suggest that countries with larger mining shares tend to have poorer health and education outcomes than countries with similar per capita incomes geographic characteristics and institutional quality doubling the mining share of an economy corresponds to on average the infant death rate being 20 higher life expectancy being 5 lower total years of education being 20 lower and 70 more people having no formal education divergences from the preston curve the concave relationship between cross country income and life expectancy that has long been of interest to economists demographers and epidemiologists are thus partly explained by the size of the mining sector within country evidence from indonesia paints a similar picture my results provide support for a growing body of evidence linking mining to poorer average living standards particularly vis a vis other types of income i also estimate the effects of national mining dependence on non mining income health and education investment and institutions

the elusive curse of oil abstract our goal is to show that contrary to the claims made in several recent papers the effect of a large endowment of oil and other mineral resources on long term economic growth of countries has been on balance positive moreover the claims of a negative effect of oil and mineral wealth on the countries institutions are called into question

unemployment inflation and monetarism the council s report provides a look at the 1969 71 game plan to disinflate by means of retarding aggregate demand the president elect s task force on inflation recommended as a first interim step that aggregate demand be slowed so as to bring the unemployment rate back to some equilibrium region around 4 5 percent what happened was that under the cover of the expectation and acceptance of such a limited step towards re equilibration the administration gradually tightened monetary and fiscal policy so severely as gradually to send the unemployment rate whizzing past the equilibrium zone to around 6 percent to my knowledge the theory of how and how well this medicine would act to cure the patient of his inflation was never spelled out by the council of economic advisers pp 533 34