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Governance structures and the durability of economic reforms: evidence from inflation stabilizations

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Author Info

  • Ball, Richard
  • Rausser, Gordon C

    ()
    (University of California, Berkeley. Dept of agricultural and resource economics)

Abstract

This paper investigates the relationship between a country's political-economic and institutional environment, and its ability to implement sustainable economic reform programs. The policy issue on which the study focuses is inflation stabilization. It consists principally of econometric estimations of the relationship between the success of stabilizations in a large sample of countries and several political and economic explanatory variables. The hypotheses tested are drawn both from the recent macroeconomic literature on policy credibility and from political science. The major findings include the following: (1) Despite the "conventional wisdom" to the contrary, political repression does not appear to be an effective means for implementing sustainable stabilization policies. Durable economic reforms and political freedoms appear to be complementary. (2) As has been previously argued theoretically and demonstrated empirically, political instability is detrimental to policy reform. (3) The political will and popular consensus for stabilization policies are enhanced during a severe economic crisis. (4) There is weak evidence that intervention by the IMF, rather than supporting reform programs, can undermine their credibility.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 648.

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Length: 44 pages
Date of creation: 1993
Date of revision:
Handle: RePEc:are:cudare:648

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Related research

Keywords: economic conditions; economic policy; macroeconomics;

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References

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  1. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
  2. Sebastian Edwards & Guido Tabellini, 1990. "Explaining Fiscal Policies and Inflation in Developing Countries," NBER Working Papers 3493, National Bureau of Economic Research, Inc.
  3. Ruttan, Vernon W., 1989. "What Happened to Political Development?," Bulletins 7462, University of Minnesota, Economic Development Center.
  4. Rodrik, Dani, 1989. "Promises, Promises: Credible Policy Reform via Signalling," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 99(397), pages 756-72, September.
  5. repec:fth:harver:1496 is not listed on IDEAS
  6. Jeffrey D. Sachs, 1985. "External Debt and Macroeconomic Performance in Latin America and East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(2), pages 523-573.
  7. Alesina, Alberto, 1992. "Political models of macroeconomic policy and fiscal reform," Policy Research Working Paper Series 970, The World Bank.
  8. Adam Przeworski & Fernando Limongi, 1993. "Political Regimes and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 51-69, Summer.
  9. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  10. Persson, Torsten & Svensson, Lars E O, 1989. "Why a Stubborn Conservative Would Run a Deficit: Policy with Time-Inconsistent Preferences," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(2), pages 325-45, May.
  11. Dornbusch, Rudiger, 1991. "Credibility and Stabilization," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(3), pages 837-50, August.
  12. Cukierman, Alex & Edwards, Sebastian & Tabellini, Guido, 1992. "Seigniorage and Political Instability," American Economic Review, American Economic Association, vol. 82(3), pages 537-55, June.
  13. Haggard, Stephan, 1985. "The politics of adjustment: lessons from the IMF's Extended Fund Facility," International Organization, Cambridge University Press, Cambridge University Press, vol. 39(03), pages 505-534, June.
  14. Alesina, Alberto & Tabellini, Guido, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(3), pages 403-14, July.
  15. Blackburn, Keith & Christensen, Michael, 1989. "Monetary Policy and Policy Credibility: Theories and Evidence," Journal of Economic Literature, American Economic Association, vol. 27(1), pages 1-45, March.
  16. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers, Tel Aviv - the Sackler Institute of Economic Studies 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
  17. Ahamed, Liaquat, 1986. "Stabilization Policies in Developing Countries," World Bank Research Observer, World Bank Group, World Bank Group, vol. 1(1), pages 79-110, January.
  18. Thomas J. Sargent, 1981. "The ends of four big inflations," Working Papers 158, Federal Reserve Bank of Minneapolis.
  19. Stephan Haggard & Robert Kaufman, 1989. "The Politics of Stabilization and Structural Adjustment," NBER Chapters, in: Developing Country Debt and the World Economy, pages 263-274 National Bureau of Economic Research, Inc.
  20. Haggard, Stephan & Webb, Steven B, 1993. "What Do We Know about the Political Economy of Economic Policy Reform?," World Bank Research Observer, World Bank Group, World Bank Group, vol. 8(2), pages 143-68, July.
  21. Rudiger Dornbusch & Ferico Sturzenegger & Holger Wolf, 1990. "Extreme Inflation: Dynamics and Stabilization," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 1-84.
  22. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
  23. Rodrik, Dani, 1990. "How should structural adjustment programs be designed?," World Development, Elsevier, vol. 18(7), pages 933-947, July.
  24. Nelson, Joan M., 1984. "The political economy of stabilization: Commitment, capacity, and public response," World Development, Elsevier, vol. 12(10), pages 983-1006, October.
  25. Scully, Gerald W, 1988. "The Institutional Framework and Economic Development," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(3), pages 652-62, June.
  26. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 25(2), pages 151-62, May.
  27. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(3), pages 651-78, August.
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Citations

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Cited by:
  1. Francisco José Veiga, 2003. "The Political Economy of Failed Stabilization," NIPE Working Papers, NIPE - Universidade do Minho 13/2003, NIPE - Universidade do Minho.
  2. Campos, Nauro F., 2000. "Context is everything : measuring institutional change in transition economies," Policy Research Working Paper Series 2269, The World Bank.
  3. Francisco José Veiga, 2002. "IMF arrangements, politics and the timing of stabilizations," NIPE Working Papers, NIPE - Universidade do Minho 2/2002, NIPE - Universidade do Minho.
  4. Campos, Nauro F. & Nugent, Jeffrey B., 1999. "Development Performance and the Institutions of Governance: Evidence from East Asia and Latin America," World Development, Elsevier, vol. 27(3), pages 439-452, March.
  5. Vítor Castro, 2003. "The Impact of Conflicts of Interest on Inflation Stabilization," NIPE Working Papers, NIPE - Universidade do Minho 8/2003, NIPE - Universidade do Minho.

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