| 1. |
- Folke, Olle, 1979-
(författare)
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Parties, Power and Patronage : Papers in Political Economy
- 2010
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- This thesis consists of three empirical essays in political economics."Shades of Brown and Green: Party Effects in Proportional Election Systems" is the first paper to develop a method for estimating the causal effect of party representation in proportional election systems. This method is applied to Swedish municipalities. The results show that party representation has a large effect on immigration policy and environmental policy. Parties profiling themselves in a policy area also have the largest effects on it. There is no evidence for party representation having an effect on tax policy."Midterm Slumps in US State Elections: Coattails, Power Balancing, or Referenda?" examines midterm slumps in US state legislatures and the mechanisms that cause them. The results show that the party of the governor systematically loses legislative seats in the midterm elections. Through the use of a regression discontinuity design it can be ruled out that this is caused by a surge-and-decline type mechanism. Instead, the results suggest that the midterm slump can be attributed, in about equal shares, to the midterm elections being a referendum on gubernatorial performance and the voters using the midterms for balancing of power."Patronage and Elections in U.S. States" examines if control over patronage jobs increased a political party's probability of winning elections in US States. A patronage system is a practice where a political party, after winning an election, reward their supporters by giving them government jobs. The essay provides evidence that patronage does -- or, rather, did -- help U.S. parties in power to retain it. There is also evidence for an "entrenched" party in power for a longer time period can use patronage more effectively than a "weak" party that usually is out of power.
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| 2. |
- Baltrunaite, Audinga, 1985-
(författare)
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Political Economics of Special Interests and Gender
- 2016
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- Political Finance Reform and Public Procurement: Evidence from Lithuania. Can political donations buy influence? This paper studies whether firms trade political contributions for public procurement contracts. To answer this question, I focus on the Lithuanian political economy. Combining data on a large number of government tenders, the universe of corporate donors and firm characteristics, I examine how a ban on corporate donations affects the awarding of procurement contracts to companies that donated in the past. Consistent with political favoritism, contributing firms’ probability of winning goes down by five percentage points as compared to that of non-donor firms after the ban. Among different mechanisms, the hypothesis that corporate donors get confidential information on competing bids prevails. The empirical results are in line with predictions from a first-price sealed-bid auction model with one informed bidder. Evidence on firm bidding and victory margins suggests that contributing firms adjust their bids in order to secure contracts at a maximum revenue. I assess that tax payers save almost one percent of GDP thanks to the reform.Gender Quotas and the Quality of Politicians. We analyze the effects of the introduction of gender quotas in candidate lists on the quality of elected politicians, as measured by the average number of years of education. We consider an Italian law which introduced gender quotas in local elections in 1993, and was abolished in 1995. As not all municipalities went through elections during this period, we identify two groups of municipalities and use a difference-in-differences estimation. We find that gender quotas are associated with an increase in the quality of elected politicians, with the effect ranging from 0.12 to 0.24 years of education. This effect is due not only to the higher number of elected women, who are on average more educated than men, but also to the lower number of low-educated elected men. The positive effect on quality is confirmed when we measure the latter with alternative indicators, it persists in the long run and it is robust to controlling for political ideology and political competition.Affirmative Action and the Power of the Elderly. There is evidence that age matters in politics. In this article we study whether implementation of affirmative action policies on gender can generate additional effects on an alternative dimension of representation, namely, the age of politicians. We consider an Italian law which introduced gender quotas in candidate lists for local elections in 1993, and was abolished in 1995. As not all municipalities went through elections during this period, we can identify two groups of municipalities and use a difference-in-differences estimation to analyze the effect of gender quotas on the age of elected politicians. We find that gender quotas are associated with election of politicians that are younger by more than one year. The effect occurs mainly due to the reduction in age of elected male politicians and is consistent with the optimizing behavior of parties or of voters.Let the Voters Choose Women. Female under-representation in politics can be the result of parties' selection of candidates and/or of voters’ electoral preferences. To assess the impact of these two channels, we exploit the introduction of Italian Law 215/2013, which prescribes both gender quotas on candidate lists and double preference voting conditioned on gender. Using a regression discontinuity design, we estimate that the law increases the share of elected female politicians by 22 percentage points. The result is driven by the increase in preference votes cast for female candidates, suggesting a salient role of double preference voting in promoting female empowerment in politics.
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| 3. |
- Dehdari, Sirus Håfström, 1983-
(författare)
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Radical Right, Identity, and Retaliation
- 2018
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- Economic Distress and Support for Far-right Parties – Evidence from Sweden. This paper studies the effects of economic distress on support for far-right parties. Using Swedish election data, I show that layoff notifications among low-skilled native-born workers account for 31 percent of the increased vote share for the Swedish far-right party the Sweden Democrats. The effect of layoff notifications on support for the Sweden Democrats is larger in areas with a high share of low-skilled immigrants, and in areas with a low share of high-skilled immigrants. These findings are in line with theories suggesting that voters attribute their impaired economic status to immigration, due to labor market concerns. Furthermore, I find no effects on voting for other anti-EU and anti-globalization parties, challenging the notion that economic distress increases anti-globalization sentiment. Using detailed survey data, I present suggestive evidence of how increased salience of political issues related to immigration channels unemployment risk into support for far-right parties.The Origins of Common Identity: Division, Homogenization Policies and Identity Formation in Alsace-Lorraine. We exploit the quasi-exogenous division of the French regions Alsace and Lorraine after the Franco-Prussian War in 1870 due to disagreements in the German leadership to provide evidence of group identity formation within historically homogeneous regions. People in the treated area, which was exposed to repressive homogenization policies aimed to suppress group identity, express a stronger regional identity and support more regional autonomy today. Using a regression discontinuity design at the municipal level, we find that support for two crucial referenda, which would have increased regional autonomy, subscription rates to regional newspapers, and regionalist party votes are significantly higher in the treated area. The results are robust across different specifications and bandwidths, and not driven by language differences, large agglomerations or distance to foreign countries. The differences in regional identity are strongest for the first two age cohorts after World War II and become weaker for later generations.Gender Differences in Revenge and Strategic play: A Natural Experiment. This paper provides new evidence of gender differences in retaliatory behavior. Using game show data from a natural setting where stakes are high, we ask whether men are more likely to retaliate following an attack and whether the gender of the target matters for this decision. The behavior studied in this paper is the decision of whom to send the question to in a quiz show setting. We observe a 23 percent gender gap in the propensity to retaliate: women are less likely to seek revenge. The gender of the target matters for women but not for men, with women being more likely to retaliate against men than women. In addition, we show that retaliation is a successful way to avert future attacks in the short term. This is especially true for women, yet we find that women seek less revenge than men.
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| 4. |
- Dev, Divya, 1988-
(författare)
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Essays on Gender, Development and Political Economy
- 2021
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- The Long-Run Impact of Protestant Missionary Activity on Female Labour-Force ParticipationResearch has shown that missionary activity, in general, and Protestant missionary activity, in particular, has had a long-lasting positive effect on literacy, education and democratic values. In this chapter, I analyse the differential effect of early 20th century Protestant and Catholic missionary activity in three former British colonies - Kenya, Tanzania and Uganda - on female labour-force participation with a particular focus on formal-sector employment. Using survey data, I find that Protestant missionary activity, compared to Catholic missionary activity, has a persistent positive relationship with education, especially for women and girls, is associated with greater female empowerment within the household and increases in the likelihood that women are employed full time, in non-agricultural skilled work and that they earn cash wages. Furthermore, with a novel dataset on public sector employees in Tanzania, I find that greater Protestant missionary activity, as measured by the number of Protestant mission stations in a district, is positively related to higher shares of female employees, especially civil servants, and an increase in the likelihood that a Local Government Authority is led by a woman.The Impact of Reservation on Female Representation - Evidence from Uttar PradeshIndia has a policy of reserving certain political positions for women and marginalised caste-groups which has increased their representation in local governments. In this chapter, I use the rotating design of India's reservation policy to estimate what happens in the election following reservation. I explicitly look at reservation for women with and without caste restrictions separately. I find that in the election following reservation for women there is an increase in the share of women mayors with particularly strong effects for lower-caste women where the share of lower-caste women mayors increases by 80%. I find limited evidence that this is driven by the re-election of incumbents but, instead, that it is driven by increases in the quality and quantity of candidates. In the election following reservation for women, I estimate an increase in the number of candidates and their quality, as measured by literacy, for both male and female candidates. Voting from Abroad: Assessing the Impact of Local Turnout on Expatriates' Voting BehaviourOver 150 countries allow expatriate citizens to vote in their country of origin. Yet, little is known about their voting behaviour and how this is affected by host countries. Using unique micro-data on Chilean expatriates living in Europe, we study how the host country's turnout affects expatriates' electoral participation in the 2017 Chilean Presidential election. We focus on the 2014 European Parliament election turnout in the district of the Chilean's geocoded residence and exploit local transitory shocks to the cost of voting given by the rainfall on the day of the election. We find that a 1 percentage point increase in the host country's turnout decreases the electoral participation of Chilean expatriates by nearly 1 percentage point. This suggests a trade-off between political engagement in host country and home country politics. We find a stronger impact for young Chileans and those living in small communities, and in localities more welcoming to migrants.
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| 5. |
- Iwanowsky, Mathias, 1987-
(författare)
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Essays in Development and Political Economics
- 2018
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- This thesis consists of three self-contained essays in economics.Property Rights, Resources, and Wealth: Evidence from a land reform in the United States: This paper compares the effectiveness of two alternative property rights regimes to overcome the Tragedy of the Commons. One regime is to distribute access rights under public ownership, as proposed by Samuelson, the other is to sell land to generate private ownership as proposed by Coase. However, as property rights are not randomly allocated, causal evidence on the relative effectiveness of these two regimes is scarce. I exploit a spatial discontinuity generated by the 1934 Taylor Grazing Act, which created 20,000 miles of plausibly exogenous boundaries that separated publicly owned rangeland from open-access rangeland. I combine these boundaries with data on the timing of private-property sales to jointly estimate the effects of public and private ownership on resource exploitation and income in a spatial regression discontinuity design. Using satellite-based vegetation data, I find that both property rights regimes increased vegetation by about 10%, relative to the open-access control. Census-block-level income data reveals that public ownership raised private household income by 13% and decreased poverty rates by 18%. To study mechanisms, I exploit variation in pre-reform police presence and panel data on farm values, and show that legal enforcement through police presence is a necessary condition for the positive and long-lasting effects of both regimes to arise.State Repression, Exit, and Voice: Living in the Shadow of Cambodia’s Killing Fields: This paper asks whether state repression is an effective strategy for silencing dissent and changing political beliefs. We use evidence from history’s most severe episode of state-led repression, the genocide in Cambodia under the Khmer Rouge, to estimate the effects of political violence on political behavior four decades later. To establish causality, we rely on the Khmer Rouge’s desire to create an agrarian society, moving forced labor to areas experiencing higher agricultural productivity. Using historic rainfall to generate exogenous variation in productivity shows that more people died in productive communes. Higher productivity under the Khmer Rouge leads to more votes in favor of the opposition over the authoritarian incumbent and increased support for democratic principles. At the same time, citizens become more cautious in their interactions with the local community as captured by lower participation in community organizations and less trust. Our results suggest that state repression makes people more convinced about the need for opposing views but more careful in expressing them, making politics less personal and more competitive.The Effects of Migration and Ethnicity on African Economic Development: Migration between countries has been shown to have positive effects on economic outcomes such as trade by fostering economic and cultural integration. In Africa, where ethnic identification is reasonably strong, omitting ethnic links between countries likely introduces a considerable bias in the estimates. Following the literature, I use past migrant clusters as instruments to show that migration in 1990 led to more bilateral exports for neighboring countries in the period 1989-2014. To account for the ethnic heterogeneity of African countries, I generalize this approach and use pre-colonial ethnic linkages between of home- and foreign-countries as an instrument for migration. The results suggest a downward bias when not accounting for ethnic heterogeneity. I discuss potential concerns of pre-colonial ethnic linkages and find no evidence of omitted variable biases caused by similar languages, preferences, or conflict. Ethnic connections instead facilitate trade, especially for groups that are excluded from government coalitions. The results are consistent with a model of international trade where cross border connections decrease the fixed costs of exporting.
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| 6. |
- Mitrunen, Matti, 1988-
(författare)
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Essays on the Political Economy of Development
- 2019
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- Structural Change and Intergenerational Mobility: Evidence from the Finnish War ReparationsThis paper presents evidence that government industrial policy can promote new industries, move labor out of agriculture into manufacturing, and have long-term effects via increased human capital accumulation and upward mobility. I use plausibly exogenous variation generated by the Finnish war reparations (1944-1952) that forced the largely agrarian Finland to give 5% of its yearly GDP to the Soviet Union in the form of industrial products. To meet these terms, the Finnish government provided short-term industrial support that persistently raised the employment and production of treated, skill-intensive industries. I trace the impact of the policy using individual-level registry data and show that the likelihood of leaving agriculture for manufacturing and services increased substantially in municipalities more strongly affected by the war reparations shock. These effects were persistent: 20 years after the intervention, the reallocated workers remained in their new sectors and had higher wages. Younger cohorts affected by the new skill-intensive opportunities obtained higher education and were more likely to work in white-collar occupations by 1970. This result is consistent with higher returns to education. Finally, I link parents to children to study how the policy affected upward mobility. I show that mobility in both income and education increased in the exposed locations, as people in lower socioeconomic groups benefited from the structural change.Tracing Out the Finnish Kuznets Curve: Famine, Threat of Revolution, and DemocratizationWe study the long-run development of Finland with a particular focus on some causes and consequences of inequality broadly defined. We show that the Finnish famine of 1866-1868 led to increased inequality in the long-run and tighter coercion in the labor markets of the early 1900s. Economic inequality at the time meant political exclusion, as voting rights and vote counts in municipal elections were tied to taxable income. We provide evidence consistent with discontent theories of conflict that these factors contributed to the emergence of the Finnish Civil War in 1918. The threat of revolution became real with the civil war and further led to the successful extension of the franchise. Municipalities with higher levels of inequality and more insurgents experienced a more drastic shift towards equality and higher levels of redistribution after the conflict.Can You Make an American? Compulsory Patriotism and Assimilation of ImmigrantsThis paper investigates the success of assimilation efforts in the U.S. during the Age of Mass Migration. I focus on a largely overlooked case of American nation-building, the introduction of compulsory patriotic acts, such as the Pledge of Allegiance, to American schools in the late 19th century. Using a legislative change in the State of New York as an experiment, I show that immigrant children exposed to compulsory patriotism in school were more assimilated as adults, measured by naturalization, the naming of children, military service, and intermarriage. These positive effects on assimilation hold for immigrants from all the large origin countries. Overall, this paper provides evidence that even softer, hearts and minds types of interventions that do not provide any new information can have long-lasting effects.
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| 7. |
- Sigurdsson, Jósef, 1985-
(författare)
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Essays on Labor Supply and Adjustment Frictions
- 2019
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- Labor Supply Responses and Adjustment Frictions: A Tax-Free Year in IcelandHow does labor supply respond to a temporary wage change? To answer this question, I study an unexpected and salient tax reform in Iceland in 1987 that resulted in a year free of labor income taxes, but creating only minimal income effects, offering an ideal natural experiment. I first construct a new employer-employee dataset from digitized administrative records for the population. I then use two complementary research designs to estimate Frisch elasticities. The first design, which is standard, exploits the progressivity of the tax system and identifies an intensive-margin elasticity of 0.4. The second design, which is new, uses similarities in life-patterns of labor supply and identifies an extensive-margin semi-elasticity of 0.07. Guided by a combination of machine learning and causal estimation, I uncover three key mechanisms behind these responses. First, the young and those close to retirement drive the extensive-margin response. Second, workers with temporal flexibility and the hourly paid have substantially higher elasticities than constrained workers. However, constrained workers take up secondary jobs, which contribute 7% of the overall responses. Third, married women are more responsive than their husbands. Husbands, but not wives, respond negatively to their spouses' tax cuts, inconsistent with unitary household models. My results imply that voluntary changes in work are key to the transmission of aggregate shocks, but the responses depend on labor-market and demographic structures.The Gift of Moving: Intergenerational Consequences of a Mobility ShockWe exploit a volcanic "experiment" to study the costs and benefits of geographic mobility. We show that moving costs (broadly defined) are very large and labor therefore does not flow to locations where it earns the highest returns. In our experiment, a third of the houses in a town were covered by lava. People living in these houses where much more likely to move away permanently. For those younger than 25 years old who were induced to move, the "lava shock" dramatically raised lifetime earnings and education. Yet, the benefits of moving were very unequally distributed within the family: Those older than 25 (the parents) were made slightly worse off by the shock. The large gains from moving for the young are surprising in light of the fact that the town affected by our volcanic experiment was (and is) a relatively high income town. We interpret our findings as evidence of the importance of comparative advantage: the gains to moving may be very large for those badly matched to the location they happened to be born in, even if differences in average income are small.Time-Dependent or State-Dependent Wage-Setting? Evidence from Periods of Macroeconomic InstabilityAdministrative data on monthly wages in Iceland during 1998-2010 provide new insight into nominal wage rigidity. Unlike the data used in previous work, ours have a higher frequency, minimal measurement error, and a long sample including a period of substantial macroeconomic instability. We find that the monthly frequency of nominal wage changes is 13 percent. Although nominal wage cuts are rare, their frequency rises following a large macroeconomic shock. Timing of wage changes is both time-dependent and state-dependent: we find evidence of synchronization of adjustment and contracts of fixed duration, but also that inflation and unemployment over the wage spell affect the timing of adjustment.Household Debt and Monetary Policy: Revealing the Cash-Flow ChannelWe examine the effect of monetary policy on household spending when households are indebted and interest rates on outstanding loans are linked to short-term interest rates. Using administrative data on balance sheets and consumption expenditure of Swedish households, we reveal the cash-flow transmission channel of monetary policy. On average, indebted households reduce consumption spending by an additional 0.25-0.35 percentage points in response to a one percentage point increase in the policy rate, relative to a household with no debt. This is true both among households with low and high levels of illiquid wealth, such as homeowners, who hold disproportionally little liquid wealth and display hand-to-mouth behavior when faced with increased interest expenses. We show that these responses are driven by households that have some or a large share of their debt in contracts where interest rates vary with short-term interest rates, such as adjustable-rate mortgages (ARMs), which implies that monetary policy shocks are quickly passed through to interest expenses.
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| 8. |
- Sun, Xueping, 1988-
(författare)
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Essays on China’s Economic Development : Innovation, Public Debt and Social Connections
- 2022
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- The Innovation Cost of Short Political Horizons: Evidence from Local Leaders’ Promotion in ChinaI digitize the career histories of Chinese city leaders and link them to economic policies and innovation outcomes. I exploit political connections formed through previous work ties to generate variation in leaders’ promotion expectations. I find that when leaders are connected, they can expect an earlier promotion. Such expectations lead them to pursue a fast-over-slow strategy for growth: higher spending on infrastructure, lower spending on science and technology, and a lower effort in promoting innovation. As a result, the local economy has higher short-term growth but lower future patenting and long-term growth.Public Debt Financing and Local Credit Allocation: Evidence from ChinaWe exploit a regulatory change in China that shifts its local governments’ debt financing from bank loans to bond issuance as a quasi-experiment to study the effect of public debt financing on local firms’ capital structure. We first find a crowding-out effect between corporate borrowing and public debt when local governments heavily rely on bank debt. Following the regulatory shock that local governments switch to another financing alternative – bonds, we observe that firms are crowding-in in cities where public bank debt is high, and this result is mainly driven by firms with higher performance. Lastly, we find that the switch in public debt financing leads firms with sufficient cash flow to increase investment.Social Connections and the Spatial Spread of COVID-19 in ChinaI study how well the spread of COVID-19 across Chinese cities can be predicted by social connections and travel flows across cities. I analyze a panel of 300 cities for the period from January 23rd to March 23rd, 2020. I construct a measure, SocialMediaConnection, of social connections using aggregated social media communications across cities from Weibo, one of China’s largest social media platforms. I find that SocialMediaConnection outperforms travel flows in predicting the arrival time of COVID-19: cities with higher SocialMediaConnection to Wuhan, the initial outbreak center, have their first COVID-19 cases earlier. I also find that both social media and travel connections have dual effects on local transmission, because they correlate with interpersonal contacts, but also capture communication about infection risks. The second effect is particularly pronounced for SocialMediaConnection. Consistent with this, I find that social distancing increases in cities with strong SocialMediaConnection to cities with high infection rates.
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| 9. |
- Tebbe, Sebastian, 1992-
(författare)
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Externalities and Coordination Failures
- 2023
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- Peer Effects in Electric Car Adoption: Evidence from SwedenI study peer effects in the diffusion of electric cars in Sweden. To identify peer effects, I use a shift-share IV design that links the renewal of elapsing individual-level, car leasing contracts (i.e., shift) with the propensity to acquire an electric car based on individual traits (i.e., share). I study three different peer groups: co-workers, family members, and neighbors. One new electric car causes, in the next quarter, an additional .077 new electric car acquisitions in the workplace, .014 in the family, and .111 in the neighborhood. These peer effects generate persistent shifts in the demand for electric cars rather than pulling forward future planned purchases. I show that the new electric cars obtained by peers largely crowd out diesel and petrol cars and that peer effects are associated with the transmission of information. Peer effects reduce carbon emissions by encouraging peers to acquire electric and cleaner cars, drive less, and lower the number of cars. Finally, I document how the empirical findings alter the design of optimal environmental policies.Optimal Congestion Zone Pricing, Driving Behavior, and Vehicle ChoiceUrban driving causes local congestion and emission externalities, motivating numerous cities to establish location-based road pricing policies. This article provides a theoretical and empirical framework for optimal congestion charges that explicitly targets local emission and congestion externalities. As an application, I implement the optimal congestion formula by estimating the effect of the congestion zone on car ownership and driving behavior in Stockholm. To identify these effects, I exploit a temporary exemption of alternative fuel cars and variation in individuals' exposure to tolls on the road section between home and work using Swedish administrative microdata. I document that individuals exposed to congestion charges on their way to work are .84 percentage points more likely to acquire an alternative fuel car but 1.1 percentage points less likely to adopt a fossil fuel car. Adopting an alternative fuel car corresponds to a substitution from fossil fuel cars as the size of the fleet remains stable. The congestion charge resulted in an annual increase of 157 vehicle kilometers traveled by commuters in alternative fuel cars and a decrease of 298 kilometers in fossil fuel cars, suggesting that commuters partly substituted to alternative modes of transport. The empirical estimates imply an optimal congestion charge, on average, of €.38 per entrance, with diminished driving in the congestion zone accounting for three-quarters of the total charge.Do We All Coordinate in the Long Run?Players often fail to coordinate on the efficient equilibrium in laboratory weak-link coordination games. In this paper, we investigate whether such coordination failures can be mitigated by increasing the number of rounds or altering per-period stakes. We find that neither time horizon nor stakes affect equilibrium selection. In contrast to previous findings, players are not more likely to play above the previous period’s minimum choice when the horizon is longer or per-period stakes are lower. We also investigate which socio-demographic factors and behavioral traits correlate most strongly with play both in the first round and in subsequent rounds. Cognitive ability as measured by a cognitive reflection test stands out as the characteristic that is most strongly associated with efficient coordination.
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| 10. |
- Favara, Giovanni, 1970-
(författare)
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Credit and Finance in the Macroeconomy
- 2006
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Doktorsavhandling (övrigt vetenskapligt/konstnärligt)abstract
- Agency Costs, Net Worth and Endogenous Business Fluctuations. This essay proposes a theory of endogenous business fluctuations. A central tenet of the theory is that investment decisions depend upon entrepreneurs' incentive to exert effort and investors' incentive to control entrepreneurs. This double-sided incentive is used to show how recessions prevent entrepreneurs from engaging in unproductive activity and booms facilitate the adoption of unproductive arrangements, so that recessions may sow the seeds for a subsequent boom while economic expansions may create the conditions for their own demise.Imperfect Information and Housing Price Dynamics. This essay develops a theory of house price dynamics in a model where agents are imperfectly informed about the nature of disturbances to their income. Relative to the benchmark case of perfect information, information heterogeneity increases the sensitivity of house prices to individual income shocks. If household decisions are based on the expectation of other households' expectations, higher order expectations tend to reduce the discrepancy of house prices from their perfect information value.Reconsidering the Role of Money for Output, Prices and Interest Rates. New Keynesian models of monetary policy predict no role for monetary aggregates. This essay evaluates the empirical validity of this prediction by studying the effects of shocks to monetary aggregates using a VAR. Shocks to monetary aggregates are identified by the restrictions suggested by New Keynesian monetary models. Contrary to the theoretical predictions, shocks to broad monetary aggregates have substantial and persistent effects on output and prices.An Empirical Reassessment of the Relationship between Finance and Growth. This essay re-examines the empirical relationship between financial development and economic growth. It presents evidence based on a variety of econometric methods and standard measures of financial development. There are two main findings. First, in contrast with the recent evidence, cross section and panel data instrumental variables regressions reveal that financial development does not cause economic growth. Second, using a procedure designed to estimate long-run relationships in a panel with heterogeneous slope coefficients, there is no clear indication that finance spurs economic growth.
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