For at give jer rigeligt med læsestof til sommerferien og måske lidt inspiration til en kommende opgave, har vi lagt fire nye arbejdspapirer på www.empiria.dk.

Vi kommer vidt omkring i empirias arbejdspapirer. Det femte arbejdspapir evaluerer et test i mikroøkonometri, og i det sjette arbejdspapir bevæger vi os over i politisk økonomi.

Empiria Working paper No. 5:
Evaluating a Series-based Semiparametric Test for Additive Separability,
by: Karen Keller, Anders Munk-Nielsen and Jesper Riis-Vestergaard Sørensen

Abstract
In this paper we perform a sensitivity analysis of a test for additive separability proposed by through a number of Monte Carlo studies. We evaluate the relative performance of using series base functions with a global focus, namely polynomials, compared to using the linear spline base employed in the original article, which has a local focus. Focusing on the size of the test, we find that the two bases perform equally well as long as the series length (the number of approximating functions) is chosen appropriately. Generally, the test seems more robust to the issue of oversmoothing than, for example, a test considered in . Furthermore, we try various data-generating processes and find the test to be robust
to non-uniformly distributed explanatory variables and discontinuity in the unknown function. We conclude that the test seems highly robust to many of the issues appearing in economic applications.

Empiria Working paper No. 6:
Political Cycles and Fiscal Policy,
by: Niels-Jakob Harbo Hansen

Abstract
We present and extend an existing model of Political Budget Cycles with opportunistic parties and rational voters. Each party has a level of competence which is not observed by the voters. One fraction of the voters is informed, and able to infer this competence level. The remaining fraction is uninformed and unable to infer this level. The model is originally developed by Shi and Svensson (2006), but we extend their model by endogenising the share of informed voters as a function of education level, transparency of fiscal policy and access to independent media. We show that the deficit in an election year is decreasing in these three variables. The predictions of the model are tested in a panel of 85 countries over a period of 25 years using various econometric methods, and we find that most predictions of the model are consistent with the data.

Empiria Working paper No. 7:
Risk versus Uncertainty,
by: Andreas Lund Hetland

Abstract
This article, written in an essay format, conducts a review of the notions of risk and uncertainty. The main objective is to draw attention to the relevance of separating risk from uncertainty,
and the implications for modern mainstream economic theory. This is attempted by outlining the premises of modern decision theory (which accounts for uncertainty) and modern macroeconomic theory (which does not account for uncertainty), followed by an evaluation of their inconsistencies. It is argued that failure to distinguish uncertainty from risk in macroeconomic theory may severely confound the conclusions derived from said theory. Following, policy implications derived from confounded theoretical conclusions may be dangerously misleading. Conclusively, it is proposed to adopt risk and uncertainty as separate notions in macroeconomic theory.

Empiria Working paper No. 8:
Government Debt Runs,
by: Adam Tejs Jørring

Abstract
This paper will study how bailout packages can have adverse and counter-intuitive effects due to political uncertainty. We will use a dynamic debt run model to describe why CDS spreads on peripheral European countries' sovereign bonds have widened, even when the European Central Bank has provided de facto credit lines to the distressed countries through the EFSF and the EFSM. Emphasis is given to fundamental volatility, the imperfectness of the credit line due to political risk and on how the dynamic decision structure can cause the creditors to make a pre-emptive run even if the country is still solvent. This paper finds that the relative increase in short-term CDS prices on Greek government bonds can be partly attributed to a change in the market's perception of the credit line, a change caused by heightened political uncertainty. This contributes to the inversion of the CDS curve. The credit line prolongs the process before debt restructuring ensuring a longer period of higher yields and thus higher financing cost. Hence the credit line can, due to higher political risk, exacerbate rather than mitigate the creditors' incentives to run.

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