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At the aggregate level, considerable cross-national variation in economic voting results. ... Cross-national diversity of media. Institutional contexts. Implications for EV Models? ...

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why the economy

Why the Economy?

Raymond Duch

University of Houston

Randy Stevenson

Rice University

slide4
At the individual level, limited efforts to understand cross-national variation.
    • Lewis-Beck 1988
    • Paldam 1991
  • Nonetheless some interesting differences in model results cross-nationally
slide5
At the aggregate level, considerable cross-national variation in economic voting results.
  • “Clarity of responsibility” is one effort to help understand – but limited.
research puzzle
Research Puzzle
  • We suspect individual-level economic voting models vary significantly cross-nationally.
  • But current published modeling efforts are not rich enough to draw meaningful conclusions.
our insights
Our Insights
  • Economic evaluations are attitudes – information processing, cueing and cognitive psychology literature.
  • Measure extent to which economic information is “mediated”.
mediated economic cues
Mediated Economic Cues
  • Citizens employ cues/information short-cuts in forming economic assessments
    • Luppia & McCubbins argument
    • Nevertheless information gathering costs matter
slide12
Political actors, elites, media attempt to shape these cues or “packaging” of messages
    • Zaller on the strategic manipulation of media by political actors
    • Iyengar on framing
slide13
Distorted messages regarding economy?
    • Some evidence from analyses of different media
      • Negativity bias
      • Human interest bias
distortions depend on
Distortions depend on:
  • Information gathering costs
  • Cross-national diversity of media
  • Institutional contexts
implications for ev models
Implications for EV Models?
  • Economic evaluations are based on distorted information
  • Seriously questions the “democratic accountability” theory of EV
null hypothesis
Null hypothesis
  • Economic perceptions and actual economic outcomes track each other in a regular fashion
  • The series are co-integrated and can be modeled as an ECM
mediated cues argument
Mediated cues argument
  • There is distortion in mass assessments of economic outcomes.
  • This distortion is a function of mediated messages regarding the economy (media, politicians, etc.)
hypothesis
Hypothesis
  • Distortion evidenced by poor ECM fit.
  • Mediation implies degree of distortion correlated with cost of information
    • High for unemployment
    • Low for inflation
  • Mediation implies asymmetric effects
slide19
Mediation also implies considerable cross-national variation in degrees of distortion
  • Mediation implies distortions in both mass and elite economic assessments
slide20
Data
  • Mass public’s economic assessments:
    • Monthly consumer confidence surveys conducted by the European Commission in all member countries 1986-2000
  • Elite’s economic assessments
    • Monthly business confidence surveys from European Commission 1967-2000
slide21
Economic indicators
    • Quarterly GDP growth from OECD (Palmer and Whitten) CPI and unemployment figures from The Economist
  • All variables are transformed into standardized z scores
the error correction model
The error correction model
  • DProInfit = ai-d[ ProInfit-1- t1INFit] +b1DINFit+1 + eit
slide28
d =

t-test on d indicates significance of co-integration

slide29
t1 =
  • long term multiplier for the effect of a change in the real economy on economic expectations
  • Expectation is that t1= 1
cpi and price expectations
CPI and Price Expectations
  • d (ECM) parameter significant in all but one country (Italy)
  • The long term relationship between CPI and Price Expectations captured by t1 is significant and close to 1 as expected
  • Note the asymmetry -- t1 is larger when inflation increasing
unemployment and unemployment expectations
Unemployment and Unemployment Expectations
  • d (ECM) parameter significant is not significant
  • Suggesting the two series are not co-integrated.
general economy gdp
General Economy & GDP
  • d (ECM) parameter significant in all countries
  • The long term relationship between general economy and GDP captured by t1 is significant and close to 1 in vast majority of case
  • Asymmetry in t1 is less consistent but evident
cross national variation
Cross national variation
  • Note there is cross-national variation in
    • The magnitude of t1
    • The incidence of asymmetry
conclusions
Conclusions
  • Perceptions of the economy and the real economy are in many cases co-integrated and seem to fit an error correction process
  • There is evidence of distortion
slide39
There is also evidence that distortion results from mediated cues
    • Economic outcomes that are costly to monitor (unemployment) are perceived less well by the mass public than easily monitored outcomes (CPI)
    • Asymmetry in reactions to positive and negative economic news
cross national variation40
Cross-national variation
  • Long-term equilibrium relationship between series
  • Asymmetry varies by nation
  • Suggests role of mediated economic information
what drives popularity series
What Drives Popularity Series?
  • Subjective assessments of the economy – which we think are shaped from mediated representations of the economy?
  • Or, the real economy?
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