Скачать презентацию Using the Iowa Electronic Markets in Macroeconomics Macroeconomic Скачать презентацию Using the Iowa Electronic Markets in Macroeconomics Macroeconomic

6e23fcb4dd3064cd77c6737dc4621734.ppt

  • Количество слайдов: 47

Using the Iowa Electronic Markets in Macroeconomics Macroeconomic Conditions: Measurement, Meaning, and Political Implications Using the Iowa Electronic Markets in Macroeconomics Macroeconomic Conditions: Measurement, Meaning, and Political Implications Developed by: Scott Simkins - North Carolina A&T State University Tom Gruca - University of Iowa Eric Rahimian - Alabama A&M University © IEM 2000 1

Motivation: Government Affects the Economy l Government spending is nearly 1/5 of GDP in Motivation: Government Affects the Economy l Government spending is nearly 1/5 of GDP in 2000 © IEM 2000 2

Does the Economy Affect the Government? l l Specifically, do macroeconomic conditions influence national Does the Economy Affect the Government? l l Specifically, do macroeconomic conditions influence national elections? Political candidates think so. . . © IEM 2000 3

Political Quotes l l l Reagan (1980): “Are you better off than you were Political Quotes l l l Reagan (1980): “Are you better off than you were four years ago? ” Clinton (1992): “It’s the economy, stupid!” Gore/Clinton (2000): “Are you better off than you were eight years ago? ” © IEM 2000 4

How do we Determine the Condition of the Economy? l Measuring Macroeconomic Conditions – How do we Determine the Condition of the Economy? l Measuring Macroeconomic Conditions – – Inflation rate Unemployment rate Economic growth rate International trade and the balance of trade © IEM 2000 5

Four Questions l l How do we measure these? How well is the economy Four Questions l l How do we measure these? How well is the economy performing according to these measures? How does economic performance influence national elections? What influences economic performance? © IEM 2000 6

Measurement: Inflation l l Overall price level is measured by the Consumer Price Index Measurement: Inflation l l Overall price level is measured by the Consumer Price Index (CPI) and the GDP Deflator (DEF) The inflation rate is the percent change in the overall price level in the economy over a given period of time. © IEM 2000 7

Inflation - CPI Measure l l One way to measure inflation is to determine Inflation - CPI Measure l l One way to measure inflation is to determine changes in the cost of a given market basket of goods and services over time. Consumer Price Index (CPI): measures the cost of a market basket of goods and services (that a typical urban wage earner would purchase) at a particular date relative to the cost of that same market basket of goods and services in a selected base period. © IEM 2000 8

Inflation - CPI Measure l Inflation Rate: The percentage change in the value of Inflation - CPI Measure l Inflation Rate: The percentage change in the value of the consumer price index (CPI) from one year to the next. © IEM 2000 9

Inflation - GDP Deflator Measure l l An alternative way of measuring inflation is Inflation - GDP Deflator Measure l l An alternative way of measuring inflation is to use a broader basket of goods and services; in particular, the GDP Deflator measures the price level based on the total amount of goods and services produced in the economy each year. The GDP Deflator measures the cost of an economy’s production in current-year prices relative to that year’s production in constant, or base-year prices. © IEM 2000 10

Inflation - GDP Deflator Measure l GDP Deflator (DEF): measures the value of current Inflation - GDP Deflator Measure l GDP Deflator (DEF): measures the value of current production in the country at base year prices © IEM 2000 11

Inflation Rate: GDP Deflator Measure l Inflation Rate: The percentage change in the value Inflation Rate: GDP Deflator Measure l Inflation Rate: The percentage change in the value of the GDP Deflator from one year to the next. © IEM 2000 12

Measurement: Unemployment l l Unemployed: a person who is actively seeking work but does Measurement: Unemployment l l Unemployed: a person who is actively seeking work but does not currently have a job. Labor force: persons 16 years of age and older who are employed or unemployed © IEM 2000 13

Measurement: Unemployment l The unemployment rate is the percentage of the labor force that Measurement: Unemployment l The unemployment rate is the percentage of the labor force that is officially unemployed. © IEM 2000 14

Measurement: Economic Growth l l Measures of economic growth are based on how fast Measurement: Economic Growth l l Measures of economic growth are based on how fast a country’s per capita real GDP is growing. Real GDP: value of a country’s annual production of currently produced goods and services, measured in base year prices © IEM 2000 15

Measurement: Economic Growth l Per capita real GDP is a country’s level of real Measurement: Economic Growth l Per capita real GDP is a country’s level of real GDP in a specific time period divided by the number of people in the population at that time. © IEM 2000 16

Measurement: Economic Growth l Economic growth is simply the growth rate of per capita Measurement: Economic Growth l Economic growth is simply the growth rate of per capita real GDP (PCRGDP) over time. © IEM 2000 17

Measurement: International Trade l Balance of Payments © IEM 2000 18 Measurement: International Trade l Balance of Payments © IEM 2000 18

Economic Performance: The Historical Experience © IEM 2000 19 Economic Performance: The Historical Experience © IEM 2000 19

CPI and the Inflation Rate: The Historical Record © IEM 2000 20 CPI and the Inflation Rate: The Historical Record © IEM 2000 20

© IEM 2000 21 © IEM 2000 21

The Unemployment Rate: The Historical Record © IEM 2000 22 The Unemployment Rate: The Historical Record © IEM 2000 22

© IEM 2000 23 © IEM 2000 23

Economic Growth: The Historical Record © IEM 2000 24 Economic Growth: The Historical Record © IEM 2000 24

International Trade: The Historical Record © IEM 2000 25 International Trade: The Historical Record © IEM 2000 25

© IEM 2000 26 © IEM 2000 26

Economic Performance: How are we Doing Today? l Current Conditions – Inflation? – Unemployment? Economic Performance: How are we Doing Today? l Current Conditions – Inflation? – Unemployment? – Economic Growth? – International Trade? © IEM 2000 27

Does Economic Performance Affect National Elections? l l l Do voters reward economic performance Does Economic Performance Affect National Elections? l l l Do voters reward economic performance at the ballot box? What do economists and political scientists have to say about this? Three ways to predict who will win a national election: – public opinion polls – economic models – Iowa Electronic Markets © IEM 2000 28

Public Opinion Polls l Most objective ones are conducted by independent organizations – Research Public Opinion Polls l Most objective ones are conducted by independent organizations – Research companies Gallup, Harris – News outlets l CBS, New York Times, CNN l l Select a representative cross-section of particular population – Everyone has an equal chance of being selected – Opposite of phone-in polls where you can express you opinion many times © IEM 2000 29

Public Opinion Polls l Population depends on the subject of the poll – For Public Opinion Polls l Population depends on the subject of the poll – For general public opinion, from adults over 18 – For election forecasts, registered or likely voters Example question on the economy: l How would you rate economic conditions in this country today, excellent, good, only fair, or poor? Gallup Poll l – 25% Excellent, 49% Good – National sample of Adults – August 18 -19, 2000 © IEM 2000 30

Public Opinion Polls Trial heat polls l Now, suppose that the presidential election were Public Opinion Polls Trial heat polls l Now, suppose that the presidential election were being held today, would you vote for: l – Bush 46% of likely voters – Gore 45% of likely voters – Buchanan 1% of likely voters l Registered voters were slightly different: – Bush 41% – Gore 48% – Buchanan 1% l Gallup Poll of August 24 -27, 2000 © IEM 2000 31

Limits of Public Opinion Polls l Polls can be inaccurate for many reasons – Limits of Public Opinion Polls l Polls can be inaccurate for many reasons – – – l l Registered v. likely voters Undecided voters Uninformed voters Can we determine which candidate people think will win an election rather than which candidate they want to win? Ask this question of informed and involved people © IEM 2000 32

Iowa Electronic Market l l l Participants express their opinions by buying and selling Iowa Electronic Market l l l Participants express their opinions by buying and selling contracts Contract values are determined by the election outcome Example: 2000 Vote Share Market – – 3 contracts, one each for Bush, Gore and Buchanan Payment at end is based on candidates’ share of 3 candidates’ total popular vote © IEM 2000 33

Iowa Electronic Market l How does this work? Prices on the market are predictions Iowa Electronic Market l How does this work? Prices on the market are predictions of how well a candidate will do in the election. l Example: Prices on August 28, 2000 l – – – Bush Gore Buchanan $0. 490 $0. 021 © IEM 2000 34

Iowa Electronic Market l l How accurate are the IEM predictions? In the last Iowa Electronic Market l l How accurate are the IEM predictions? In the last 4 Presidential elections, the average error – – l l for major polls = XX% For IEM = xx% Check out current markets at: www. biz. uiowa. edu © IEM 2000 35

Economic Models If Americans vote their pocketbooks, then the state of the economy can Economic Models If Americans vote their pocketbooks, then the state of the economy can be used to predict Presidential elections l Fair Model by economist Ray Fair of Yale University l © IEM 2000 36

The Fair Model of the Presidential Election Vote – Predicts the percentage of the The Fair Model of the Presidential Election Vote – Predicts the percentage of the 2 -party vote gained by the Democratic candidate – Depends on: The party currently holding the Presidency l For how many terms l Is an incumbent running l Inflation l Economic growth l © IEM 2000 37

The Fair Model of the Presidential Election Vote Very accurate model l Using data The Fair Model of the Presidential Election Vote Very accurate model l Using data from 1880 -1960, it predicted the next 9 elections with a mean absolute error of 2. 4 percentage points l New model using data up to 1996 race is in Fair. xls spreadsheet l © IEM 2000 38

Presidential Election 2000 Predictions © IEM 2000 39 Presidential Election 2000 Predictions © IEM 2000 39

Presidential Election 2000 Predictions Poll Results: l l l l Oct. 1 Predictions Voter. Presidential Election 2000 Predictions Poll Results: l l l l Oct. 1 Predictions Voter. com 42% Bush LA Times 48% Bush Newsweek 43% Bush NY Times/CBS 39% Bush WSJ/NBC 42% Bush CNN/USA Today 46% Bush Source: WSJ 9/28/00 © IEM 2000 41% Gore 42% Gore 46% Gore 42% Gore 45% Gore 46% Bush 40

Presidential Election 2000 Predictions IEM Share Prices l l l Oct. 1 Predictions Last Presidential Election 2000 Predictions IEM Share Prices l l l Oct. 1 Predictions Last Prices at Midnight Bush 0. 490 Gore 0. 505 Buchannan 0. 014 © IEM 2000 41

Presidential Election 2000 Predictions Economic Model l Oct. 1 Predictions – Economic Model – Presidential Election 2000 Predictions Economic Model l Oct. 1 Predictions – Economic Model – Use Fair. xls © IEM 2000 42

Questions: l l l How close were three predictions to the actual result? Why Questions: l l l How close were three predictions to the actual result? Why were there some prediction errors? What is missing? Microeconomic factors © IEM 2000 43

Extensions: Predicting Congressional Outcomes l l Lewis-Beck model: Change in actual House seats of Extensions: Predicting Congressional Outcomes l l Lewis-Beck model: Change in actual House seats of the President’s party is a function of: – – – the President’s job approval six months before the election growth rate in real per capita GDP between first and second quarters of the election year whether it is a midterm election © IEM 2000 44

Lewis-Beck Model l l Inputs may be obtained from Assignment 1 and gallup. com Lewis-Beck Model l l Inputs may be obtained from Assignment 1 and gallup. com Calculate change in seats using Lewis-Beck model. xls © IEM 2000 45

Congressional Control Markets l l Run every two years In 2000, there were 4 Congressional Control Markets l l Run every two years In 2000, there were 4 contracts – – l RH_RS Republican House and Senate RH_NS Republican House and non-Republican Senate NH_RS non-Republican House and Republican Senate NH_NS non-Republican House and Senate Control means 218 Republican House members, 51 Republican Senators © IEM 2000 46

2000 Congressional Control Market Prices as of 10/1/00 l l l RH_RS 0. 386 2000 Congressional Control Market Prices as of 10/1/00 l l l RH_RS 0. 386 RH_NS 0. 021 NH_RS 0. 500 NH_NS 0. 100 What actually happened? How well did the Lewis-Beck model predict? © IEM 2000 47