December 19, 2009
Caporale, Tony and Kevin B. Grier (2000) Political Regime Change and the Real Interest Rate, Journal of Money, Credit and Banking, 32/3: 320-334.
A number of influential macroeconomic models, from Keynes to the monetarists, assume that real interest rates (i.e. discounted for inflation) change over time and are sensitive to their political environment, other words that they are policy variant. However this assumption has not been empirically tested, should this assumption be in fact contradicted, it would have important repercussions on these models’ viability. Moreover, the policy-variant hypothesis apparently conflicts with Eugene Fama’s conclusion that the mean of the real rate is essentially constant (p.322). The literature has found to match Fama’s views more closely with reality: real interest rates are “essentially constant over long periods of times but subject to infrequent mean shifts that are not related to policy regime changes”. Read the rest of this entry »
August 13, 2009
O’Brien, Patrick K. (1988) “The Political Economy of British Taxation, 1660-1815”, The Economic History Review , 41/1, 1-32.
Disclaimer: this summary is written by the contributors of the blog and not by the author of the article. Any mistake is Manuel’s fault (and he shall be punished).
From the Restoration to Waterloo, warfare occupied nearly half the fiscal years, imposing an ever-increasing burden upon the British taxpayers (p.1). The sudden extra expenditures caused by the conflicts were met not through higher taxes but thanks to loans obtained on the London capital market. The British “tax system was [not] elastic or reliable enough to finance abrupt transitions”. The service of the debt contracted during wars soon took over most of peacetime budget (p.2). Read the rest of this entry »