The economics of defence in France and the UK

France and the UK face similar geostrategic circumstances: both were once Great Powers and still retain their positions among the five permanent members of the UN Security Council. During the Cold War both were dwarfed by the super-powers and were thus extremely sensitive about their status: what the French called their grandeur and the British called their seat at the top table. Despite their strategic similarities, they have differed in many of their defence policy choices and in particular how they balanced their strategic aspirations with their limited financial resources. Thus a comparison of British and French defence policies provides a revealing case study of military choices

Global factors, unemployment adjustment and the natural rate

OECD unemployment rates show long swings which dominate shorter business cycle components and these long swings show a range of common patterns. Using a panel of 21 OECD countries 1960-2002, we estimate the common factor that drives unemployment by the first principal component. This factor has a natural interpretation as a measure of global expected returns, which is given added plausibility by the fact that it is almost identical to the common factor driving investment shares. We estimate a model of unemployment adjustment, which allows for the influence both of the global factor and of labour market institutions and we examine whether the global factor can act as a proxy for the natural rate in a Phillips Curve. In 15 out of the 21 countries one cannot reject that the same natural rate, as a function of the global factor, appears in both the unemployment and inflation equations. In explaining both unemployment and inflation, the global factor is highly significant, suggesting that models which ignore the global dimension are likely to be deficient

Drugs and violence in Colombia: a VECM analysis

It has been widely argued that the production of illegal drugs, particularly cocaine, has financed guerrilla activity in Colombia. This paper uses quarterly time-series data for Colombia 1994-2005 to examine the interaction between legal agricultural production, illegal agricultural production of drugs and the number of guerrilla attacks. The time series analysis suggests that drug production acts as a weakly exogenous stochastic trend which has a negative effect on legal agricultural production and a positive effect on guerrilla attacks; with a long-run elasticity of attacks to drug production very close to unity

Counterfactual analysis in macroeconometrics: an empirical investigation into the effects of quantitative easing

This paper is concerned with ex ante and ex post counterfactual analyses in the case of macroeconometric applications where a single unit is observed before and after a given policy intervention. It distinguishes between cases where the policy change affects the model’s parameters and where it does not. It is argued that for ex post policy evaluation it is important that outcomes are conditioned on ex post realized variables that are invariant to the policy change but nevertheless influence the outcomes. The effects of the control variables that are determined endogenously with the policy outcomes can be solved out for the policy evaluation exercise. An ex post policy ineffectiveness test statistic is proposed. The analysis is applied to the evaluation of the effects of the quantitative easing (QE) in the UK after March 2009. It is estimated that a 100 basis points reduction in the spread due to QE has an impact effect on output growth of about one percentage point, but the policy impact is very quickly reversed with no statistically significant effects remaining within 9-12 months of the policy intervention

Will Parent Training Reduce Abuse, Enhance Development, and Save Money? Let's Find Out

Outlines a strategy for testing the feasibility of community-developed parent training initiatives to prevent child abuse and neglect. Calls for a federal grant program to test community-wide implementation of parent training programs in stages

Beyond the DSGE Straitjacket

Academic macroeconomics and the research department of central banks have come to be dominated by Dynamic, Stochastic, General Equilibrium (DSGE) models based on micro-foundations of optimising representative agents with rational expectations. We argue that the dominance of this particular sort of DSGE and the resistance of some in the profession to alternatives has become a straitjacket that restricts empirical and theoretical experimentation and inhibits innovation and that the profession should embrace a more flexible approach to macroeconometric modelling. We describe one possible approach

2004 Presidential Election: Who Won The Popular Vote? An Examination of the Comparative Validity of Exit Poll and Vote Count Data

* There is a substantial discrepancy -- well outside the margin of error and outcomedeterminative -- between the national exit poll and the popular vote count.* The possible causes of the discrepancy would be random error, a skewed exit poll, or breakdown in the fairness of the voting process and accuracy of the vote count.* Analysis shows that the discrepancy cannot reasonably be accounted for by chance or random error.* Evidence does not support hypotheses that the discrepancy was produced by problems with the exit poll.* Widespread breakdown in the fairness of the voting process and accuracy of the vote count are the most likely explanations for the discrepancy.* In an accurate count of a free and fair election, the strong likelihood is that Kerry would have been the winner of the popular vote.This document was originally published by Verified Vote 2004, and is authored by Jonathan Simon, currently with Election Defense Alliance

Beyond the DSGE Straitjacket

Academic macroeconomics and the research department of central banks have come to be dominated by Dynamic, Stochastic, General Equilibrium (DSGE) models based on micro-foundations of optimising representative agents with rational expectations. We argue that the dominance of this particular sort of DSGE and the resistance of some in the profession to alternatives has become a straitjacket that restricts empirical and theoretical experimentation and inhibits innovation and that the profession should embrace a more flexible approach to macroeconometric modelling. We describe one possible approach.macroeconometric models, DSGE, VARs, long run theory

The economic impact of demographic structure in OECD countries

We examine the impact of demographic structure, the proportion of the population in each age group, on growth, savings, investment, hours, interest rates and inflation using a panel VAR estimated from data for 20 OECD economies, mainly for the period 1970-2007. This flexible dynamic structure with interactions among the main macroeconomic variables allows us to estimate long-run effects of demographic structure on the individual countries. Our estimates confirm the importance of these effects

Macroeconometric Modelling with a Global Perspective

This paper provides a synthesis and further development of a global modelling approach introduced in Pesaran, Schuermann and Weiner (2004), where country specific models in the form of VARX* structures are estimated relating a vector of domestic variables, xit, to their foreign counterparts, x*it, and then consistently combined to form a Global VAR (GVAR). It is shown that the VARX* models can be derived as the solution to a dynamic stochastic general equilibrium (DSGE) model where over-identifying long-run theoretical relations can be tested and imposed if acceptable. This gives the system a transparent long-run theoretical structure. Similarly, short-run over-identifying theoretical restrictions can be tested and imposed if accepted. Alternatively, if one has less confidence in the short-run theory the dynamics can be left unrestricted. The assumption of the weak exogeneity of the foreign variables for the long-run parameters can be tested, where x*it variables can be interpreted as proxies for global factors. Rather than using deviations from ad hoc statistical trends, the equilibrium values of the variables reflecting the long-run theory embodied in the model can be calculated. This approach has been used in a wide variety of contexts and for a wide variety of purposes. The paper also provides some new results.Global VAR (GVAR), DSGE models, VARX*