Public policies: will policy be ineffective if welfare is a random-walk |
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Authors: | Abereniye Atemie-Obuoforibo |
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Affiliation: | Department of Economics , University of Crete , Greece |
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Abstract: | This study contradicts the view that policy cannot be effective if the welfare variable is a random-walk. Also, the study disagrees with the methodology employed by some proponents of this view, and goes on to show that the conclusion of policy ineffectiveness was only due to a wrong inference procedure. Furthermore, it points out that the notion of policy effectiveness suggests the examination of the relationship between policy and welfare; hence, what to look for is not a trend in the individual time series, but a common trend which relates the policy instrument and the welfare-variable in the policy environment under consideration. |
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