THE RISE AND DECLINE OF ECONOMIC POLICY AS AN AUTONOMOUS DISCIPLINE: A CRITICAL SURVEY

After Adam Smith's statement of market virtues, the process of gestation of economic policy as a rational set of rules for public agenda has been rather slow. Until not so long ago, economic policy as a discipline was often confined to prescribing practical rules intended to explain technical procedures of government intervention. Economic policy– as a coherent and to some extent autonomous discipline–only emerged in the late 1950s in Scandinavia, the Netherlands and Italy, when solid foundations indicating not only microeconomic but also macroeconomic market failures and a theory about the conditions for policy effectiveness and design were consistently developed. This paper intends to explain the reasons for the emergence of the discipline, the circumstances that favoured its diffusion, the reasons for its apparent setback and some factors that could facilitate its diffusion in the next years     

LONG DARK SHADOWS OR INNOVATIVE SPIRITS? THE EFFECTS OF (SMOOTHING) BUSINESS CYCLES ON ECONOMIC GROWTH: A SURVEY OF THE LITERATURE

Abstract It is argued that fiscal policy can play a part in preventing a possible downward spiral or be instrumental in achieving a higher long‐term path of growth. Never before has this argument been advanced as frequently as in the current economic crisis. However, the economic literature – an overview of which is given here – does not provide an unambiguous answer, either theoretically or empirically, to the question of the relationship between (the smoothing of) cyclical fluctuations and long‐term growth. In this context, two main contrasting explanatory paradigms can be identified: Schumpeter’s concept of creative destruction and the learning by doing hypothesis. Even if it were possible to identify the relationship more clearly on this basis, it is important not to lose sight of the problems associated with the real‐time assessment of the current economic situation, time lags and political economic incentives even in difficult times.     

ON THE EFFECTIVENESS OF FISCAL POLICY AS AN INSTRUMENT OF MACROECONOMIC POLICY

This paper demonstrates that fiscal policy is an effective and essential instrument of stabilisation macroeconomic policy. This is particularly so if it is co-ordinated with monetary policy, especially in the current worldwide economic situation.     

The political economy of international trade and factor mobility

Abstract. Free trade in goods and factors is efficient. When we move away from economic theory and consider the policies actually followed by governments, we observe distortions being implemented both on goods and factors trades. It is natural then to question the relative merits of the two types of intervention, and the normative literature has provided only partial answers. We ask then why is the international flow of goods and factors not free, and the political economy literature has looked at the two issues only separately. In studying the determination of trade policy, a theoretical paradigm has emerged, focusing on the role of influence driven contributions. This approach has also found strong empirical support. The literature on the political economy of factor mobility, on the other hand, is fragmented. Distortions in labor and capital flows are typically the subject of different studies, and only recently a unified framework has been proposed. More work has to be done in this area as well as in integrating the political economy of trade and factor movements.     

关于中国工业企业利润率决定因素的研究

根据产业组织理论中的SCP分析框架可知,影响企业利润的因素包括市场结构,企业的经营状况。同时,由于在我国的转轨时期,存在大量不同的经济成分以及各种所有制类型的企业。在中国特殊的政治经济环境下,所有制结构也是影响企业盈利能力的重要因素。本文拟采用2000~2003年全国工业企业数据,对行业利润水平、差异状况进加以度量,并构建行业利润决定模型,找出决定我国工业企业利润差异的因素,然后进一步分析这些因素发挥作用的机制,并分析其政策含义。     

Political market failure? The effect of government unity on energy technology policy in industrialized democracies

When do governments implement technology policies that allow society to solve social problems at a lower cost? Focusing on the case of energy, we argue that in industrialized democracies, severe social problems provoke an effective technology policy response when the government is unified. A unified government can easily strike the bargains required to secure political support for new technology programs. We test this theory against data on public energy research and development (R&D) in 22 OECD countries, 1980–2006. We find that as government fractionalization increases in a country, the sensitivity of public energy R&D to wasteful energy use, which presents economic and environmental difficulties to the society, declines. The analysis reveals a new reason for ineffective technology policies and contributes to the broad literature on political market failure.     

Changing Trends in Regional Economic Development Policy Governance: The Case of Northern Ontario,Canada

This article analyses the changing trends in regional economic development policy delivery in multilevel governance systems. Although the imperatives of coordination of public policy interventions across multiple levels has generally been recognized, not enough attention has been given to how different political systems actually adapt their institutional and policy designs to effectively operate in the emergent complexity of multilevel governance systems. The article focuses on regional economic development policy governance in the province of Ontario, Canada over the past three decades, drawing insights from new regionalism, organization theory and governance literature to examine the prospects and challenges of policy delivery in politically complex multilevel systems. The case study illustrates how regional economic development policy is increasingly dictated by complex environmental and institutional forces of multilevel governance that are shaped by the particular character of a political system.     

THE GOVERNANCE OF FINANCIAL SUPERVISION: RECENT DEVELOPMENTS

This paper examines the evolution of financial supervision as a policy tool over the last three decades, with a focus on the issues raised by the Global Crisis. It considers a sample of advanced and emerging economies to discuss the four main questions debated in the literature, and addressed in the economic policy arena: the architecture of supervision, the role of the central bank as supervisor, the governance of supervision, and financial supervision vs. the internationalization of finance. Our survey finds that, on each of these issues, theory and practice do not offer clear‐cut answers and unambiguous optimal solutions. At the same time, the most promising approach is to tackle financial supervision as a principal‐agent problem, where economics and political economy approaches must be used in combination to improve both positive and normative analyses of supervisory governance.     

Economic uncertainty and national bitcoin trading activity

This study analyzes the dynamics between bitcoin trading, price activities, and economic surprise shocks from a broad and novel perspective on a national level. We start by estimating the response of bitcoin trading in terms of volume and volatility to economic surprises. Following this, we extend our framework by applying a Generalized AutoRegressive Conditional Heteroskedasticity model to get an indication of the volatility reaction of national bitcoin activities to economic surprise shocks. Our results show that local and global shocks affect local bitcoin activities and trading volatilities, confirming that economic events affect bitcoin markets. We argue that increased trading activity, coupled with a price reaction, indicates that bitcoin might be considered a hedge or safe haven asset against economic uncertainty. We find evidence that bitcoin is treated as a speculative asset against negative economic policy uncertainty shocks in Canada pre-Covid-19. These results change during the Covid-19 pandemic, leading to a significant structural break. Here, we find indications that bitcoin might be treated as a safe-haven asset in New Zealand and Australia. This shows that bitcoin behaves differently depending on the studied country, underlining the importance of country-level studies. It also shows that bitcoin is a new asset that is evolving rapidly and that the period in which it is studied is important.     

THE REGIONAL EFFECTS OF MONETARY POLICY: A SURVEY OF THE EMPIRICAL LITERATURE

This survey provides an updated review of the empirical literature on the regional effects of monetary policy in economic activity by means of undertaking a threefold perspective. First, the main methodological dimensions of this literature are examined while pinpointing those modelling or methodological traits that constitute a source of diverging estimates and thereby produce inconclusive evidence. Secondly, the estimates yielded by the literature are summarized by carrying out a cross‐study analysis of the results for each monetary union. By drawing on empirical regularities that are robust across studies, the conclusiveness of the results is assessed, while those monetary unions for which conclusive evidence is still lacking are also identified. Lastly, the sources of regional heterogeneity identified by these studies are reviewed in order to shed some light on the linkage between monetary policy and territorial heterogeneity. As a result of this threefold perspective, this survey delivers overall structured conclusions and updated policy‐relevant lessons. Moreover, various research gaps and emerging topics in the literature are also identified.     

THE ECONOMETRIC ANALYSIS OF ECONOMIC POLICY

The application of econometric analysis to the process of economic policy formulation is considered. A framework is provided by the theory of reduction, specifically reductions where key information losses would invalidate policy. Consequently, model evaluation; the role of econometric models; forecasting; exogeneity; causality; constancy and invariance; unobservables; seasonality; and data integrability are considered, together with specific policy issues where econometrics can clarify the problems.     

A PANEL DATA APPROACH FOR PROGRAM EVALUATION: MEASURING THE BENEFITS OF POLITICAL AND ECONOMIC INTEGRATION OF HONG KONG WITH MAINLAND CHINA

We propose a simple‐to‐implement panel data method to evaluate the impacts of social policy. The basic idea is to exploit the dependence among cross‐sectional units to construct the counterfactuals. The cross‐sectional correlations are attributed to the presence of some (unobserved) common factors. However, instead of trying to estimate the unobserved factors, we propose to use observed data. We use a panel of 24 countries to evaluate the impact of political and economic integration of Hong Kong with mainland China. We find that the political integration hardly had any impact on the growth of the Hong Kong economy. However, the economic integration has raised Hong Kong's annual real GDP by about 4%. Copyright © 2011 John Wiley & Sons, Ltd.     

VARIATIONS ON THE THEME OF CONNINGa IN MATHEMATICAL ECONOMICS

Abstract The mathematization of economics is almost exclusively in terms of the mathematics of real analysis which, in turn, is founded on set theory (and the axiom of choice) and orthodox mathematical logic. In this paper I try to point out that this kind of mathematization is replete with economic infelicities. The attempt to extract these infelicities is in terms of three main examples and one general discussion: dynamics, policy and rational expectations and learning are the examples; a game theory without ‘subjectivism’, based on the axiom of determinateness, is discussed in general terms. The focus is on the role and reliance of standard fixed‐point theorems in orthodox mathematical economics.     

THE ECONOMICS OF THE GREENHOUSE EFFECT

Abstract. The recognition that economic activity is contributing to climatic change, with attendant costs that may be of large magnitudes, has set in motion a substantial research effort. This paper seeks to review the contribution of economics to analysis of the greenhouse effect and to the policies and instruments suggested as means of mitgiating its damage.
A brief overview of the causes and consequences of global warming is given, and a number of energy-economy forecasting models are examined. As the costs of global warming depend upon the extent to which preventative and adaptive measures are undertaken, the techniques available to evaluate these costs are surveyed.
We examine extant targets for greenhouse gas emissions reduction, and explore the frameworks within which optimal policy targets can be designed. The paper also considers the narrower question of (minimized) abatement costs, and surveys the types of models used to estimate them.
The merits of alternative policy instruments are examined, paying particular attention to the role that risk and uncertainty, and the costs of monitoring and implementation of policy under conditions of imperfect information, may play in the choice of instruments. Problems of international co-operation in the development of abatement policy are examined, and we consider the compensations (across both nations and generations) that are likely to be necessary conditions for effective action.     

THE ECONOMICS OF VOLUNTARY EXPORT RESTRAINT AGREEMENTS

Abstract. The three substantive sections of this survey deal with the economic consequences of voluntary export restraint agreements (VERs), e.g. the Multi-Fibre Arrangement and VERs on Japanese auto exports. Section 2 focuses on the disposition of quota rents under the assumptions of perfectly competitive markets and the absence of substitute suppliers. Section 3 considers imperfect competition and the role of VERs as cartelization instruments, facilitating collusion. Section 4 analyzes the discriminatory effects of VERs when there are third country suppliers. A broad conclusion is that the economic consequences of VERs are more complex than the standard trade policy analysis based on tariffs because of the issues discussed in Sections 3 and 4.     

Financial conditions and monetary policy in the US

We examine the FED’s monetary policy rule with financial stability considerations and under asymmetry. We use the National Financial Conditions Index constructed by the Chicago FED in order to test whether financial stability concerns enter monetary policy formulations in the US. We model nonlinearity in monetary policy by a Markov regime-switching model. The results show that the monetary policy implemented by the FED can be characterized as a two-state Markov process and financial instability significantly increases the likelihood of regime-switching from a “tranquil” to a “distressed” regime. Moreover, the likelihood of a switch in the FED’s monetary policy regime between tranquil and distressed seems to increase when a certain threshold level of the financial conditions index is reached. Finally, our results seem to be robust to alternative specifications of the reaction function and different forms of non-linearity.     

FOOLING ALL OF THE PEOPLE

The public's expectations about government policy are a key influence on the economy and can be more important than the policy itself. By allowing the public to know that it is considering reflation outside the Medium Term Financial Strategy, the government is reducing the credibility of the MTFS. This Forecast Release draws on some of the latest developments in economic theory, in the field of 'time inconsistency', to argue that the early years of the MTFS suffered from continuing but incorrect expectations that the policy would be abandoned. To avoid repeating this mistake, the government should promptly concede the current calls for reflation if it is unable to resist them, although a preferable outcome for unemployment and inflation can be achieved by re-affirming the MTFS. A worse outcome than either of these is obtained if the government continues with the MTFS while leaving open the possibility of a sudden reflation.     

延迟退休、生育政策调整与中国经济增长

政府在放松生育政策的同时，配合退休政策的调整具有重要的现实意义。通过构建延迟退休和生育调整的理论模型发现：从劳动力增量看，延迟退休能够产生即期效应，而生育调整具有滞后效应，且两者导致的劳动力增量差距呈现先扩大后缩小的特点，节点在2031年；从社会总负担看，在实行延迟退休后，总抚养比迅速下降到一个低水平位置；从总产出看，同时实施延迟退休和放松生育政策，经济中潜在的福利损失最小；从产出增速看，放开生育的同时配合延迟退休，经济增速下降最慢；从人均产出看，放开生育的同时最好配合延迟退休，否则人均收入提升的效果不如政策不变时效果。     

Optimal monetary policy in a new Keynesian model with animal spirits and financial markets

This article presents a macro-finance-interaction model that integrates a NKM with bounded rationality and an agent-based financial market model. We derive four interactive channels between the two sectors where two channels are strictly microfounded. We analyze the impact of the different channels on economic stability and derive optimal (conventional and unconventional) monetary policy rules. We find that coefficients of optimal Taylor rules do not significantly change if financial market stabilization becomes part of the central bank׳s objective function. Additionally, we show that rule-based, backward-looking monetary policy creates huge instabilities if expectations are boundedly rational. Our model is externally validated by showing that it generates fat tailed output growth rates.     

EQUALITY OF OPPORTUNITY: POLICY AND MEASUREMENT PARADIGMS

Abstract Equality of opportunity is a widely accepted principle of distributive justice and it is the leading idea of most political platforms in several countries. According to this principle, a society might institute policies that secure an equal distribution of the means to reach a valuable outcome among its members. Once the set of opportunities have been equalized, which particular opportunity, the individual chooses from those open to her, is outside the scope of justice. Ex ante inequalities, and only those inequalities, should be eliminated or compensated for by public intervention. The recent literature on the opportunity egalitarianism often merges these questions introducing two different economic issues. On one side the design of a public policy intended to implement the equality of opportunity view and on the other side the problem of measuring the degree of opportunity inequality in a society. We describe the basic setting and assumptions of some different approaches derived by Roemer’s algorithm for public policy and then we discuss some theoretical and empirical studies to separate and test alternative paradigms on the measurement of inequality of opportunity. Accordingly, an extended critique on the causality issue on policies and measurements is taken into account.