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Economy and Political Parties: The Impact of the Economic Conditions on the Party Membership Trend in England and Germany, 1950-1994
Unformatted Document Text:  11 assumes the exogeneity of independent variables which can be endogenous to dependent variable. In other words, a VAR model lets the data speak as much as possible. Third, party memberships of Labour and SPD parties are dynamic and they are affected by their past condition. As a result, a restricted model such as SEQ may not be proper for predicting the impact of the macroeconomic factors on party memberships of Labour and SPD. Meanwhile, as Brandt and Williams (2007) argued, VAR is ‘a system of unrestricted reduced form equation which captures the movement of lagged independent variables. The dynamic reduced form of VAR can be written below. y mt = β m0 + β m1 y 1 , t-1 + … β m , p y 1 , t – p + … + β m , m y m, t – 1 + … + β m , mp y m, t-p + e mt . where m is the number of endogenous variables and t is time index. (Brandt and Williams 2007, p. 19) In VAR estimation, leg length must be specified because the properties of the VAR coefficients depend upon the leg length of the VAR. Hypothetically, I expect that party memberships will increase when the economies and per capita are growing while the unemployment rate is declining. Party memberships of Labour and SPD are likely to be sensitive to the unemployment rate because the left-wing parties are likely to appeal to workers and labor union members. As a result, the increase of unemployment rate can be detrimental to the parties in terms of reducing the workers’ support. The expectation is that if the unemployment rate is declining, the party memberships of Labour and SPD are more likely to increase.

Authors: Laiprakobsup, Thanapan.
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11
assumes the exogeneity of independent variables which can be endogenous to dependent
variable. In other words, a VAR model lets the data speak as much as possible. Third,
party memberships of Labour and SPD parties are dynamic and they are affected by their
past condition. As a result, a restricted model such as SEQ may not be proper for
predicting the impact of the macroeconomic factors on party memberships of Labour and
SPD. Meanwhile, as Brandt and Williams (2007) argued, VAR is ‘a system of
unrestricted reduced form equation which captures the movement of lagged independent
variables. The dynamic reduced form of VAR can be written below.
y
mt
= β
m0
+ β
m1
y
1
,
t-1
+ … β
m
,
p
y
1
,
t – p
+ … + β
m
,
m
y
m, t – 1
+ … + β
m
,
mp
y
m, t-p
+ e
mt
. where m
is the number of endogenous variables and t is time index.
(Brandt and Williams 2007, p. 19)
In VAR estimation, leg length must be specified because the properties of the
VAR coefficients depend upon the leg length of the VAR. Hypothetically, I expect that
party memberships will increase when the economies and per capita are growing while
the unemployment rate is declining. Party memberships of Labour and SPD are likely to
be sensitive to the unemployment rate because the left-wing parties are likely to appeal to
workers and labor union members. As a result, the increase of unemployment rate can be
detrimental to the parties in terms of reducing the workers’ support. The expectation is
that if the unemployment rate is declining, the party memberships of Labour and SPD are
more likely to increase.


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