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How to Classify a Government? Can a Neural Network do it?

  • António Caleiro

    ()

    (Department of Economics, University of Évora)

An electoral cycle created by governments is a phenomenon that seems to characterise, at least in some particular occasions and/or circumstances, the democratic economies. As it is generally accepted, the short-run electorally-induced fluctuations prejudice the long-run welfare. Since the very first studies on the matter, some authors offered suggestions as to what should be done against this electorally-induced instability. A good alternative to the obvious proposal to increase the electoral period length is to consider that voters abandon a passive and naive behaviour and, instead, are willing to learn about government?s intentions. The electoral cycle literature has developed in two clearly distinct phases. The first one considered the existence of non-rational (naive) voters whereas the second one considered fully rational voters. It is our view that an intermediate approach is more appropriate, i.e. one that considers learning voters, which are boundedly rational. In this sense, one may consider neural networks as learning mechanisms used by voters to perform a classification of the incumbent in order to distinguish opportunistic (electorally motivated) from benevolent (non-electorally motivated) behaviour of the government. The paper explores precisely the problem of how to classify a government showing in which, if so, circumstances a neural network, namely a perceptron, can resolve that problem.

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File URL: http://hdl.handle.net/10174/8428
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Paper provided by University of Évora, Department of Economics (Portugal) in its series Economics Working Papers with number 9_2005.

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Length: 24 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:evo:wpecon:9_2005
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  8. Marimon, Ramon & Sunder, Shyam, 1994. "Expectations and Learning under Alternative Monetary Regimes: An Experimental Approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(1), pages 131-62, January.
  9. Peter Westaway, 1992. "A Forward-Looking Approach to Learning in Macroeconomic Models," National Institute Economic Review, National Institute of Economic and Social Research, vol. 140(1), pages 86-97, May.
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