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Are crises good for long-term growth? The role of political institutions

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  • Cavallo, Alberto F.
  • Cavallo, Eduardo A.

Abstract

This paper provides empirical evidence for the importance of institutions in determining the outcome of crises on long-term growth. We show that once unobserved country-specific effects and other sources of endogeneity are accounted for, political institutions affect growth through their interaction with crises. In particular, we find that the effect of a crisis on long-run growth is conditioned by the prevailing institutional environment. In countries with democratic institutions, the negative effect of crises is mitigated, while in countries with autocratic institutions, the negative effect is exacerbated.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 3 (September)
Pages: 838-857

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:3:p:838-857

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Financial crises Democracy Political institutions Economic growth;

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Citations

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Cited by:
  1. Jan Fidrmuc & Ariane Tichit, 2012. "How I Learned to Stop Worrying and Love the Crisis," CESifo Working Paper Series 3720, CESifo Group Munich.
  2. Yamamura, Eiji, 2011. "The changing effect of legal origin on death tolls in natural disasters from 1960 to 2008," MPRA Paper 33112, University Library of Munich, Germany.
  3. Doner, Richard, 2012. "Success as Trap? Crisis Response And Challenges To Economic Upgrading in Export-Oriented Southeast Asia," Working Papers 45, JICA Research Institute.
  4. Barry Eichengreen, 2011. "Crisis and Growth in the Advanced Economies: What We Know, What We Do not, and What We Can Learn from the 1930s," Comparative Economic Studies, Palgrave Macmillan, vol. 53(3), pages 383-406, September.
  5. Abdilahi Ali & Katsushi S. Imai, 2013. "Crises, Economic Integration and Growth Collapses in African Countries," The School of Economics Discussion Paper Series 1302, Economics, The University of Manchester.
  6. Markus Jorra, 2011. "The Heterogeneity of Default Costs: Evidence from Recent Sovereign Debt Crises," MAGKS Papers on Economics 201151, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  7. ATI Abdessatar & BEN JAZIA Rachida, 2013. "Institutional Quality And Financial Stress: Experience From Emerging Country," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 8(3), pages 5-20, December.
  8. Eiji Yamamura, 2013. "Institution and decomposition of natural disaster impact on growth," Journal of Economic Studies, Emerald Group Publishing, vol. 40(6), pages 720 - 738, November.
  9. Benarroch, Michael & Pandey, Manish, 2012. "The relationship between trade openness and government size: Does disaggregating government expenditure matter?," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 239-252.
  10. Andreas Assiotis & Kevin Sylwester, 2013. "Do the effects of corruption upon growth differ between democracies and autocracies?," University of Cyprus Working Papers in Economics 06-2013, University of Cyprus Department of Economics.

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