Macroeconomic Policy Performance Research Articles

Persistent Growth Episodes and Macroeconomic Policy Performance in Israel

This paper presents an analysis of growth episodes in Israel during the years 1961-2006. The analysis uses, in addition to the standard variables, an index of the quality of macroeconomic management along the lines presented by Sirimaneetham and Temple (2005). The quality of macroeconomic management turns out to have a significant impact on growth episodes. However, our quantitative analysis shows that exogenous variables like world trade and security events had a larger impact on growth episodes than did the policy variables. We also found that forces that enhance supply, like the labor market experience of immigrants, are insufficient to explain persistent growth episodes in Israel; demand variables are also needed in order to explain these episodes. Using our analytical framework, we quantify the contributions of the different forces to the transition from the 2001-2003 recession to the present growth episode; we found that two-thirds of this transition is explained by exogenous variables––mainly the world trade and the security situation––and one-third is explained by policy variables, i.e., better macroeconomic performance and the reduction of tax rates.

Constructing macroeconomic performance index of Indian states using DEA

PurposeThe purpose of this paper is to construct a robust macroeconomic performance (MEP) index of the State economies of an emerging market economy, i.e. India.Design/methodology/approachTwo variants of data envelopment analysis (DEA) models – radial and non‐radial – are proposed to construct the macroeconomic policy performance of 22 Indian State economies in the post‐economic reforms era covering the period: 1994‐1995 to 2001‐2002, using three macroeconomic indicators: growth in gross state domestic product, price stability, and fiscal deficit.FindingsThe authors' three broad empirical findings are: first, the radial and non‐radial DEA models yield significantly different rankings of State economies in terms of their MEP index scores; second, as against the use of only growth in gross state domestic product and price stability for MEP measure, the inclusion of fiscal deficit as an additional indicator yields a noticeable improvement not only in the State MEP index scores, but also in their rankings, thus providing the evidence of relatively successful attempt by the Indian States in reducing fiscal deficit, in general, and legislating FRBM bill, in particular; and third, a positive significant correlation between foreign direct investment (FDI) and MEP indicates that a State's overall macroeconomic policy performance does matter to attract FDI.Research limitations/implicationsSince the DEA models employed in this study ignore the possibility of asymmetric shocks, the MEP results might be questioned in this deterministic setting. However, the study period has been smooth and has not been subject to any major changes in the State economic policies. Therefore, the MEP results might not be susceptible such changes. However, further research is desired on examining the macroeconomic policy performance behavior of Indian States using bootstrapping DEA.Originality/valueNone of the past Indian studies were able to give a comprehensive picture concerning the MEP behavior of Indian State economies, since the methodologies adopted in those studies were not suitable to take into consideration all the macro indicators at a time. Therefore, this present study is considered the first of its kind in assessing the MEP index of the Indian State economies by simultaneously considering all the macro indicators.

Using data envelopment analysis to assess macroeconomic policy performance

Using data envelopment analysis to assess macroeconomic policy performance

Using data envelopment analysis to assess macroeconomic policy performance

It is common practice to summarize the macroeconomic performance of countries in terms of the four well-known dimensions captured by the magic diamond of the OECD. This study provides a comparison of several synthetic indicators that merge the four separate indicators into one single statistic. These indicators are inspired by Data Envelopment Analysis (DEA)-based models, which allow for unequal weighting of the different economic objectives. The calculated weights then act as proxies for the true policy priorities. Comparison of the models focuses on the underlying assumptions as well as on the empirical results they generate.

Economic Conditions and Electoral Outcomes: Class Differences in the Political Response to Recession

Politicians and journalists appreciate the fact that economic conditions are politically important because voters punish national administrations for bad macroeconomic policy performance. Nevertheless, scholars have been divided over the question whether economic conditions affect voters' choices of candidates in elections. The weight of results from aggregate studies suggests that economic downturns do have political costs but research at this level allows no unique specification of individual response patterns. Using data from the 1956-60 American panel study, data which span the worst recession (to that time) since the Great Depression, this paper attempts to specify the sources of political responses to the recessions of 1958 and 1960. Relative to middle class individuals, working class citizens are more severely affected by economic cycles, and they are found to provide the bulk of the electoral response to economic recession.