ECON 4999 - political parties and the business cycle

ECON 4999 - political parties and the business cycle - 3...

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Click to edit Master subtitle style 3/1/11 3. Preliminary Evidence How do we know that the model is consistent with what actually occurs in the United States?
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3/1/11 Two ways: The growth of Gross National product The supply growth of money
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3/1/11 Gross National Product Democratic Administrations During the first half of all the democratic administration’s terms, the average growth rate of Republican Administrations Throughout the first half of all the republican administrations, the average GNP growth rate
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3/1/11 Why? There is some lag time involved with policy change. A few months after the election of every republican administration, a recession has started (during this particular time period) This is not true of Democratic administrations and contradicts the predictions of the PBC
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Money Growth (theory) The time-consistent rate of money creation is lower for republican’s than it is for democrats in both observational periods One should observe a larger
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ECON 4999 - political parties and the business cycle - 3...

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