Information, expectations and macroeconomic policy.

PhDThe thesis is motivated by some important recent developments in macroeconomic theory and the theory of macroeconomic policy. A common theme emphasized throughout is the integration of rational expectations into macroeconomic policy evaluation and the sophism of conducting evaluations predicated on alternative expectations hypotheses. The application of rational expectations to optimal control theory inspires a game-theoretic paragigm for the derivation of optimal economic policies. This transform fundamentally the way in which economists should address the control problem. The recent proliferation of research in the area is subject to the first systematic investigation. The necessity for assimilating model uncertainty into the problem of policy evaluation is emphasized. This is made operational with respect to a particulaxly topical issue concerning the optimal choice of monetary instrument. A substantial part of the thesis is devoted to a rigorous exploration of the information structure conditioning expectations. Particular emphasis is on partial ignorance. An intelligent system can exploit statistical filtering techniques to extract the information content of certain economic variables. The thesis illustrates vividly the potentially critical dependence of the laws of motion of the system on the information structure. it calls for a detailed explication of that structure a3 a pre-requisite for any analysis and highlights properties of certain earlier treatments which are symptomatic of their neglect of this. Analytical work is combined with computer simulations of a larger econometric model. Higher order dynamics are the realised 3 consequences of asset accumulati6n and the government budget constraint. The issue of bond-financed deficit instability is subject to extensive testing and the implications of divergent e: cpectations mechanisms elicited

Probing the Phase-Dependent Conductance and Nonequilibrium Properties of Josephson Junctions by Means of Flux Entry into Weakly Closed Loops

Numerical simulations have shown that the relative number of flux quanta which penetrate a weakly closed superconducting loop depends upon the magnitude and sign of the phase-dependent conductance. We examine the possible use of this dependence as an experimental probe of the cosy term and nonequilibrium properties of Josephson junctions

Living With Corruption: Threshold Effects in Red Tape and Rent Seeking

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Foreign Aid – A Fillip for Development or a Fuel for Corruption?

We present an analysis of the effects of foreign aid on economic development when the quality of governance may be compromised by corruption. The analysis is based on a dynamic general equilibrium model in which growth is driven by capital accumulation and public policy is administered by government-appointed bureaucrats. Corruption may arise due to the opportunity for bureaucrats to embezzle public funds which are otherwise used to provide productive public goods and services. Our main results may be summarized as follows: (1) corruption impedes economic development and compromises the effectiveness of aid programmers; (2) the incidence of corruption may, itself, be affected by both the development process and the donation of aid; (3) foreign aid is good for development when governance is good, but may be bad (perhaps very bad) for development when governance is bad; and (4) corruption and poverty may co-exist as permanent, rather than just transitory, fixtures of an economy.Corruption; Development; Foreign aid

Financial Liberalisation, Bureaucratic Corruption and Economic

We study the effect of international financial integration on economic development when the quality of governance may be compromised by corruption. Our analysis is based on a dynamic general equilibrium model of a small economy in which growth is driven by capital accumulation and public policy is administered by government- appointed bureaucrats. Corruption may arise due to the opportunity for bureaucrats to embezzle public funds, an opportunity that is made more attractive by financial liberalisation which, at the same time, raises efficiency in capital production. Our main results may be summarised as follows: (1) corruption is always bad for economic development, but its effect is worse if the economy is open than if it is closed; (2) the incidence of corruption may, itself, be affected by both the development and openness of the economy; (3) financial liberalisation is good for development when governance is good, but may be bad for development when governance is bad; and (4) corruption and poverty may co-exist as permanent, rather than just transitory, fixtures of an economy.Corruption,development,financial liberalisation

Foreign Aid - a Fillip for Development or a Fuel for Corruption?

We present an analysis of the effects of foreign aid on economic development when the quality of governance may be compromised by corruption. The analysis is based on a dynamic general equilibrium model in which growth is driven by capital accumulation and public policy is administered by government-appointed bureaucrats. Corruption may arise due to the opportunity for bureaucrats to embezzle public funds which are otherwise used to provide productive public goods and services. Our main results may be summarised as follows: (1) corruption impedes economic development and compromises the effectiveness of aid programmes; (2) the incidence of corruption may, itself, be affected by both the development process and the donation of aid; (3) foreign aid is good for development when governance is good, but may be bad (perhaps very bad) for development when governance is bad; and (4) corruption and poverty may co-exist as permanent, rather than just transitory, fixtures of an economy.Corruption, development, foreign aid.

Distribution and Development in a Model of Misgovernance

This paper presents an analysis of bureaucratic corruption, income inequality and economic development. The analysis is based on a dynamic general equilibrium model in which bureaucrats are appointed by the government to implement a redistributive programme of taxes and subsidies designed to benefit the poor. Corruption is reflected in bribery and tax evasion as bureaucrats conspire with the rich in providing false information to the government. In accordance with empirical evidence, the model predicts a positive relationship between corruption and inequality, and a negative relationship between corruption and development. --Corruption,inequality,development.

Financial Development, Financing Choice and Economic Growth

In an overlapping generations economy households (lenders) fund risky investment projects of firms (borrowers) by drawing up loan contracts on the basis of asymmetric information. An optimal contract entails either the issue of only debt or the issue of both debt and equity according to whether a household faces a single or a double enforcement problem as a result of its own decision about whether or not to undertake costly information acquisition. The equilibrium choice of contract depends on the state of the economy which, in turn, depends on the contracting regime. Based on this analysis, the paper provides a theory of the joint determination of real and financial development with the ability to explain both the endogenous emergence of stock markets and the complementarity between debt finance and equity finance.asymmetry of information, economic growth, financial markets, stock markets development