The first chapter provides an overview of some of the main developments in the discussion of unrealistic assumptions in economics since Friedman's (1953) contribution. The subsequent chapters are devoted to clarifying the issue of unrealistic assumptions in economics. It is asserted that posing the issue in terms of the "realism of assumptions" is hampered by severe ambiguities. Rather, we should think of assumptions in terms of whether they are false or not, and ask how false assumptions pose problems to making true claims. After this, a discussion of the essential and often unacknowledged role that deductive arguments play in orthodox economics and in economics in general is given. It is argued that it is difficult to test theories by their empirical implications alone as is often asserted, by orthodox economists, in defence of the use simplifying assumptions. The importance of deductive arguments points to the necessity of evaluating whether any false/simplifying assumptions used in deductive arguments falsify the conclusion. A false assumption is not necessarily problematic. but this must be evaluated to determine whether this is so. A chapter is spent discussing what is involved in making this evaluation. The thesis ends with a chapter discussing two other important reasons for the refusal of orthodox economists to evaluate consistently the impact of simplifying assumptions on conclusions. These are the ideas that optimizing behaviour is somehow equivalent to self-interested behaviour and the apparently greater predictive power of orthodox economics afforded by the use of certain assumptions.

The issue to be examined is whether flexible exchange rates result in less variability in GDP and unemployment rates. Basically, with a fixed exchange rate governments cannot allow the exchange rate to fluctuate in response to external shocks to the economy, nor are they as able to use monetary and/or fiscal policy to respond to external shocks. Since an external shock cannot be accommodated by a nominal change in the exchange rate or through monetary policy, such shocks must be accommodated by changes in real economic activity, i.e., changes in GDP and unemployment. With a flexible exchange rate, an external shock can be accommodated by a change in the exchange rate, or through monetary and/or fiscal policy and should thus have less impact on unemployment and GDP. This hypothesis is theoretically studied and explained more widely in the thesis and is tested with the data available.

We evaluate the Taylor rule and investigate its stability for the period 1963Q2 to 1999Q4. Using a benchmark model, we demonstrate that the equation cannot be evaluated over this period without taking into account parameter instability and structural changes, which reflect changing monetary policy preferences. Neglecting to allow for at least one shift in the equation can lead to artificial results by ignoring the heterogeneity of the long-run relationship, while it is not capturing the changes in monetary policy preferences. To estimate the equation over the 1963 Q2--1999Q4 period, we follow Bai and Perron's (1998) recent methodology, with which we find evidence for up to five breaks.

This dissertation investigates the Granger-causality between exports, imports, and economic growth in 32 developing countries. The role of the imports variable in the investigation of exports-output causality is emphasized, enabling one to test for the cases direct causality, indirect causality, and spurious causality between export growth and output growth using the definitions provided by Hsiao (1982). On the technical side, the Augmented-Dickey-Fuller and Phillips-Perron tests are used to test whether exports, imports and per capita real GDP are cointegrated. Furthermore, tests for breaking trends are carried out using a modified version of the procedure advanced by Perron (1989) and Zivot and Andrews (1992). Depending on the results from these tests, vector autoregressive or vector error correction models are specified for each country. The election of lag lengths is done by using the Schwarz criterion. Following Poskitt and Tremayne (1987) a procedure for testing the decisiveness (strength) of (Granger-) causal findings is developed. Finally, the results are compared to those from a benchmark model, that is, a bivariate VAR model of export growth and output growth. The empirical results indicate the following. First, breaking trends occur frequently in macroeconomic time series. Failure to test for breaking trends may lead to the possibility of spuriously cointegrating relationships. Second, exports and per capita output were not found to be cointegrated in most cases. Third, there is only weak evidence for a positive Granger-causal relationship from export growth to output growth--the only two cases being Thailand and Pakistan. Fourth, the findings may lack decisiveness, and additional data may prove useful to draw more conclusive inferences. Fifth, results from the benchmark bivariate VARs indicate additional cases of positive causality from export growth to output growth. However, these cases should be regarded as spurious since the findings have not been confirmed when the real imports are included. Finally, there is no evidence of indirect causality from exports to output growth via the real imports variable. Thus, no causal evidence was found for the "exports as a foreign exchange source" hypothesis.

The objective of this study is to analyze the structural and behavioral attributes of a small and open subsistence economy. Using a medium-sized macroeconometric policy model, the study analyses specific structural factors and internal rigidities facing the Ethiopian economy and examines the impacts of various past and recent policies implemented by successive governments. The study addresses the question of the applicability of macroeconometric models for developing countries and uses such a model to examine the structural and institutional peculiarities of a subsistence economy. This study also presents the first macroeconometric policy model of Ethiopia. This model is used to examine the supply constraints and the importance of the exchange rate on the economy. Further the study will attempt to examine the impact of alternative macro policies on the performance of the economy and provide a quantitative framework for further policy analysis. The specific policy issues examined include: One, how was the performance of the Ethiopian economy affected by the policy shift of the mid-seventies? Two, what is the likely impact of the recently implemented devaluation of the domestic currency (birr) on the balance of payments and other economic aggregates? And, three, is there a trade-off between military expenditures and social programs? The key findings are summarized below. Devaluing the currency would: One, have an adverse impact on output growth and, hence, on components of aggregate demand--on private consumption expenditures and on private investment, for instance; two, be inflationary, as would be expected for a small (price taking) open economy; but, three, it would have a positive impact on the current account balance. A reduction in military expenditures: One, would increase total output, and would have a positive net impact on private consumption and investment expenditures; two, suggests the existence of a significant trade-off between military expenditures and expenditures on education and health; and, three, would improve the current account balance since most of the military equipment is imported. No change in policy in the mid-1970s would have: One, increased total output and sectoral outputs, and would have had a positive net impact on private consumption and investment expenditures; two, increased expenditures on education and health; but, three, would have decreased most imports and exports and would have had a net positive impact on the current account balance. (Abstract shortened by UMI.)

This thesis examines the role of exchange rate fluctuations on prices of automobiles imported into Canada over the period 1980(0)-1990(4). The theoretical model is motivated by the desire to synthesize existing models which only identify portions of incomplete exchange rate pass-through. The model captures general demand and supply influences by defining a rational expectations, dynamic optimization problem, with firms maximizing profits with respect to prices, subject to linear demand curves and quadratic adjustment costs. An extension to the model accounts for the possibility of strategic price interaction between competitors and, equally important, nests the original model. The model also strengthens the link between theoretical foundations and empirical estimation by providing a natural framework for recent econometric developments. In particular, favourable unit root and cointegration tests permit the theoretical model to be respecified as an error correction model (ECM) such that long-run equilibrium relationships can be separated from the short-run dynamics of a system. Following the theoretical foundations, each of the three separate automobile classifications (subcompact, compact/midsize, and large) is estimated using a traditional econometric approach, the Engle-Granger two-step procedure, and a Johansen (1991) /vector autoregressive (VAR) approach. Overall, results indicate that, regardless of the econometric methodology, U.S. automobile exporters pass through the largest amount of a change in exchange rates, followed in order by Germany and Japan. Knetter (1993) presents evidence to suggest little difference in pricing behaviour within common industries. Gross and Schmitt (1993) argue that the degree of pricing-to-market (PTM) varies across automobile sectors but remains similar within a given category. This thesis goes one step further and argues that pricing behaviour is different even within categories. Finally, in ranking the econometric techniques in terms of "best fit", under the assumption that the Johansen procedure identifies cointegrating vectors, the Johansen/VAR methodology produces ECMs with greater parameter stability, lower probability of model misspecification and better forecasting ability.

This study examined the effects of European economic integration in Portugal. It put forth the hypothesis that Portugal's participation in the European economic integration process has played a major role in the maintenance of political stability and in the growth of the Portuguese economy. This in turn, has to an extent, been a causal factor in the improvement in the state of the human condition through financial aid in the form of Community Structural Funds. Specific socio-economic indicators were used as a means of evaluating the human development level before and after regional integration. Since EU accession, there is evidence of a high correlation between Portugal's participation in the regional integration process, and a rise in the economic and human development level of the population. Hence, it may be assumed that the policies utilized in fostering economic integration have had a positive effect on the rate of economic progression. It has also influenced to a significant degree, the rise in the level of human development.

Abstract Not Available.

La conference de Rio de Janeiro (Juin 1992), a mis de l'avant les problemes environnementaux de notre planete. De nombreux chercheurs sont concernes par cet etat des faits et oeuvrent a retablir un certain equilibre ecologique. A travers cette modeste contribution nous avons essaye d'evaluer d'un point de vue economique la biodiversite du Parc National de l'Ichkeul qui se situe en Tunisie. Nous pensons effectivement, que la reconnaissance de l'importance biologique ne serait que mieux consideree etant donnee la valeur economique qui lui est attribuee. Afin de proceder a notre evaluation, nous avons eu recours: (1) A deux modeles econometriques specifiques, l'un lie a la peche l'autre a l'ecotourisme; (2) A un modele theorique d'evaluation economique des plantes medicinales; (3) A une analyse couts/benefices des amenagements hydrauliques. Par ailleurs, le lecteur trouvera tout le long de sa lecture tous les elements historiques, geographiques, ecologiques ( ...) necessaires a sa bonne comprehension de notre travail. Nous insistons sur le fait que ce travail est une premiere dans le genre a l'echelle tunisienne d'ou la difficulte d'obtention de donnee pertinentes ou detaillees.

Abstract Not Available.