This paper presents a new approach to estimation and inference in panel data models with a multifactor error structure where the unobserved common factors are (possibly) correlated with exogenously given individual-specific regressors, and the factor loadings differ over the cross section units. The basic idea behind the proposed estimation procedure is to filter the individual-specific regressors by means of (weighted) cross-section aggregates such that asymptotically as the cross-section dimension (N) tends to infinity the differential effects of unobserved common factors are eliminated. The estimation procedure has the advantage that it can be computed by OLS applied to an auxiliary regression where the observed regressors are augmented by (weighted) cross sectional averages of the dependent variable and the individual specific regressors. Two different but related problems are addressed: one that concerns the coefficients of the individual-specific regressors, and the other that focusses on the mean of the individual coefficients assumed random. In both cases appropriate estimators, referred to as common correlated effects (CCE) estimators, are proposed and their asymptotic distribution as N with T (the time-series dimension) fixed or as N and T (jointly) are derived under different regularity conditions. One important feature of the proposed CCE mean group (CCEMG) estimator is its invariance to the (unknown but fixed) number of unobserved common factors as N and T (jointly). The small sample properties of the various pooled estimators are investigated by Monte Carlo experiments that confirm the theoretical derivations and show that the pooled estimators have generally satisfactory small sample properties even for relatively small values of N and T.

Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure

Selection of efficient institutions or policies in politics requires constituents to estimate the net benefits of political reforms. Political competition fails to inform constituents of the costs of forgone political alternatives. Ignorance of ‘political opportunity costs’ prevents the adoption of welfare enhancing reforms of public institutions and policies. The empirical record supports this contention.

The use of knowledge about society

List of Figures ix List of Tables xi Preface and Acknowledgments xiii Introduction 1 PART I: VETO PLAYERS THEORY 17 One: Individual Veto Players 19 Two: Collective Veto Players 38 PART II: VETO PLAYERS AND INSTITUTIONAL ANALYSIS 65 Three: Regimes: Nondemocratic, Presidential, and Parliamentary 67 Four: Governments and Parliaments 91 Five: Referendums 116 Six: Federalism, Bicameralism, and Qualified Majorities 136 PART III: POLICY EFFECTS OF VETO PLAYERS 161 Seven: Legislation 165 Eight: Macroeconomic Policies 187 PART IV: SYSTEMIC EFFECTS OF VETO PLAYERS 207 Nine: Government Stability 209 Ten: Judiciary and Bureaucracies 222 Eleven: Veto Players Analysis of European Union Institutions 248 Conclusion 283 Bibliography 291 Index 309

Veto Players: How Political Institutions Work

Over the last two decades, communication has become an increasingly important aspect of monetary policy. These real-world developments have spawned a huge new scholarly literature on central bank communication-mostly empirical, and almost all of it written in this decade. We survey this ever-growing literature. The evidence suggests that communication, can be an important and powerful part of the central bank's toolkit since it has the ability to move financial markets, to enhance the predictability of monetary policy decisions, and potentially to help achieve central banks' macroeconomic objectives. However, the large variation in communication, strategies across central banks suggests that a. consensus has yet to emerge, on what constitutes an optimal communication strategy.

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Central bank communication and monetary policy: A survey of theory and evidence

Economic Freedom of the World: 2002 Annual Report

This paper reviews recent research on central bank independence (CBI) After we have distinguished between independence and conservativeness, research in which the inflationary bias is endogenised is reviewed Finally, the various challenges that have been raised against previous empirical findings on CBI are discussed We conclude that the negative relationship between CBI and inflation is quite robust

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Central Bank Independence : An Update of Theory and Evidence

Political and economic determinants of OECD budget decifits and government expenditures: a reinvestigation

This paper provides a new indicator for central bank independence (CBI) based on the turnover rate of central bank governors for 82 developing countries over the period 1980–1989. Using this new indicator it is concluded that this proxy for CBI is related to inflation, only if the high inflation countries are included in the sample. The view that both CBI and inflation are caused by effective opposition towards inflation is not supported. Using both the extreme bound analysis and Sala-i-Martin's method we do not find evidence that CBI is robustly related to economic growth.

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Does central bank independence really matter?: New evidence for developing countries using a new indicator

Often it is maintained that economic freedom may further high levels of economic growth. Using various measures of economic freedom constructed by Scully and Slottje, the robustness of this relationship is examined. Both direct and indirect effects of lack of liberties are analysed. Our main conclusion is that the link between economic freedom and economic growth depends upon the measure used: for some indicators of economic freedom there appears a robust direct relationship, while for others there is no such relationship. Investment is not related to our indicators for economic freedom.

Further evidence on the relationship between economic freedom and economic growth

This paper presents new evidence on the hypothesis that coalition governments will find it more difficult to keep their budgets in line after an adverse economic shock than do one-party, majoritarian governments. The estimates are based on a broad sample of OECD countries, for the period 1979–1995. Using various specifications as suggested in the literature, we do not find evidence that the type of government affects cross country variation in fiscal policy. However, the number of political parties in government affects central government debt growth.

https://www.jstor.org/stable/info/30026120

de Jakob Haan

Papers

Central Bank Independence : An Update of Theory and Evidence

Political and economic determinants of OECD budget decifits and government expenditures: a reinvestigation

Does central bank independence really matter?: New evidence for developing countries using a new indicator

Further evidence on the relationship between economic freedom and economic growth

The Weak Government Thesis: Some New Evidence