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Below results based on the criteria 'political economy'
Total number of records returned: 5
Modeling Dynamics in Time-Series-Cross-Section Political Economy Data
lagged dependent variable
This paper deals with a variety of dynamic issues in the analysis of time-series-cross-section (TSCS) data. While the issues raised are more general, we focus on applications to political economy. We begin with a discussion of specification and lay out the theoretical differences implied by the various types of time series models that can be estimated. It is shown that there is nothing pernicious in using a lagged dependent variable and that all dynamic models either implicitly or explicitly have such a variable; the differences between the models relate to assumptions about the speeds of adjustment of measured and unmeasured variables. When adjustment is quick it is hard to differentiate between the various models; with slower speeds of adjustment the various models make sufficiently different predictions that they can be tested against each other. As the speed of adjustment gets slower and slower, specification (and estimation) gets more and more tricky. We then turn to a discussion of estimation. It is noted that models with both a lagged dependent variable and serially correlated errors can easily be estimated; it is only OLS that is inconsistent in this situation. We then show, via Monte Carlo analysis shows that for typical TSCS data that fixed effects with a lagged dependent variable performs about as well as the much more complicated Kiviet estimator, and better than the Anderson-Hsiao estimator (both designed for panels).
Democracy and Exchange Rates: An Experimental Study
Freeman, John R.
Markov switching model
The world's financial markets are becoming increasingly liberalized and interconnected. There is much debate about whether this development is socially desirable. Of increasing interest in this debate are the implications of the globalization of finance for democracy. The relationship between the workings of currency markets and democratic institutions is studied. The economic literature on exchange rate determination is briefly reviewed. The Markov switching model is considered as one of the most useful with which to analyze the politics of exchange rate determination. Next, the political science literature is discussed, including the research on electoral systems and comparative democracy. Out of this discussion emerge several competing propositions about how political (re)equilibration affects currency markets, more specifically, what the Markov switching framework should show about the impact of electoral outcomes and political polls on compound returns (the log difference of the exchange rate) in some or all democracies. A design for testing these propositions then is laid out and implemented. The results support the view that democratic politics affects currency markets. In particular, opinion polls about chief executive and government performance have a direct effect on the probabilities of switches between currency regimes. This suggests that these polls cause currency traders to revise their expectations about the stability of governments and (or) the content of public policy. In addition, the results refute claims that pluralist and majoritarian forms of democracy are more likely to be a source of trader uncertainty and hence regime shifts than corporatist and consensual forms of democracy. There is some evidence that (democratic) institutional "incoherency" (Garrett, 1998) is a source of market uncertainty and therefore that the effects of opinion polls and other political variables on the probabilities of regime shifts are greater in the respective countries.
Methodology for Estimating the Impact of Partisan Competition on the Economy
Herron, Michael C.
This paper develops and applies a methodology designed to pinpoint the relation between government partisanship and national--level economic variables. In particular, we consider the British polity since the early 1980s and estimate the economic impact of the Conservative Party's dominance of government since 1983. Furthermore, we consider the counterfactual problem of assessing the economic consequences of a Labour win in any of the three most recent British elections. The analysis conducted in the paper creates snapshots of government partisanship effects at each national election. Thus, the paper is able not only to determine if changes in the partisan nature of British government were reflected in economic variables but also is able to consider how the relation between the partisanship of the British government and the British economy has varied over time. The ability to allow for time--based fluctuations in this relation represents an advance within the existing empirical literature on the subject of government partisanship effects. Indeed, contemporary empirical research on government partisanship and its economic consequences is entirely silent on the possibility of temporal variation in the relation between the two. The methodology employed in this paper is based on election campaign--period movements of prices of publicly--traded financial and equity derivative securities. The dataset of such securities is exceedingly rich; compared to the extant literature on government partisanship and economics, the dataset in conjunction with the models developed here allow for greater precision in estimating the impact of partisan changes in government. Overall, the tools presented augment the scholarly understanding of the implications of government partisanship.
Appendix to 'A Computable Equilibrium Model for the Study of Political Economy'
Freeman, John R.
computable political economic equilibrium
This is an appendix to 'Freeman, John R. and Daniel Houser: A Computable Equilibrium Model for the Study of Political Economy.' [cf. note 9]
MPs for Sale? Estimating Returns to Office in Post-War British Politics
regression discontinuity design
While the role of money in policymaking is a central question in political economy research, surprisingly little attention has been given to the rents politicians actually derive from politics. We use both matching and a regression discontinuity design to analyze an original dataset on the estates of recently deceased British politicians. We find that serving in Parliament roughly doubled the wealth at death of Conservative MPs but had no discernible effect on the wealth of Labour MPs. We argue that Conservative MPs profited from office in a lax regulatory environment by using their political positions to obtain outside work as directors, consultants, and lobbyists, both while in office and after retirement. Our results are consistent with anecdotal evidence on MPs' outside financial dealings but suggest that the magnitude of Conservatives' financial gains from office was larger than has been appreciated.