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Dictatorship, Democracy and Institutions: Macropolicy in China and India

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  • Ashima Goyal

    ()

  • A. K. Jha

Abstract

We explore the hypothesis that macroeconomic polices are influenced by political structure, through a systematic comparison of reform period macroeconomic policy choices and outcomes, in China and India. One decade lagged Indian reform in the context of similar economic and very different political structures offers a powerful natural experiment. Chinese low but positive real interest rates, facilitated by greater exchange rate volatility, and high infrastructure investment allowed it to outperform India in its first post reform decade. We find political structure did lead to specific inefficiencies in macroeconomic outcomes but macro-institutional changes exist that can improve policy. More openness under similar labor endowments give both countries the opportunity to commit to more effective, stable yet stimulatory, macroeconomic institutions and policies.

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Bibliographic Info

Paper provided by eSocialSciences in its series Working Papers with number id:264.

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Date of creation: Nov 2005
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Handle: RePEc:ess:wpaper:id:264

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Related research

Keywords: macropolicy; endowments; democracy; dictatorship; institutions; seignorage; policy rules; China; economic reform exchange rate volatility;

References

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  1. Yun-Wing Sung, 1996. "Chinese Outward Investment in Hong Kong: Trends, Prospects and Policy Implications," OECD Development Centre Working Papers 113, OECD Publishing.
  2. Sachs, J.D. & Woo, W.T., 1994. "Structural Factors in the Economic Reforms of China, Eastern Europe and the Former Soviet Union," Papers 94-01, California Davis - Institute of Governmental Affairs.
  3. Engerman, Stanley L., 2003. "Comment on: Tropics, germs and crops: How endowments influence economic development," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 41-47, January.
  4. William Easterly & Ross Levine, 2002. "Tropics, Germs, and Crops: How Endowments Influence Economic Development," Working Papers 15, Center for Global Development.
  5. Terry Sicular, 1998. "Capital Flight and Foreign Investment: Two Tales from China and Russia," UWO Department of Economics Working Papers 9803, University of Western Ontario, Department of Economics.
  6. Simeon Djankov & Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2003. "The New Comparative Economics," Harvard Institute of Economic Research Working Papers 2002, Harvard - Institute of Economic Research.
  7. Mariano Tommasi & Pablo T. Spiller & Ernesto Stein, 2003. "Political Institutions, Policymaking Processes, and Policy Outcomes. An Intertemporal Transactions Framework," Working Papers 59, Universidad de San Andres, Departamento de Economia, revised Jul 2003.
  8. Goyal, Ashima, 2002. "Coordinating monetary and fiscal policies: a role for rules?," MPRA Paper 29200, University Library of Munich, Germany.
  9. Marc Quintyn & Bernard Laurens & Hassanali Mehran & Tom Nordman, 1996. "Monetary and Exchange System Reforms in China: An Experiment in Gradualism," IMF Occasional Papers 141, International Monetary Fund.
  10. Allan Drazen, 1996. "The political economy of delayed reform," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 1(1), pages 25-46.
  11. Goyal, Ashima, 1999. "The Political Economy of the Revenue Deficit," MPRA Paper 29980, University Library of Munich, Germany.
  12. Acemoglu, Daron, 2003. "Why not a political Coase theorem? Social conflict, commitment, and politics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 620-652, December.
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Citations

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Cited by:
  1. Ashima Goyal, 2006. "Incentives from exchange rate regimes in an institutional context," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2006-015r, Indira Gandhi Institute of Development Research, Mumbai, India.
  2. Goyal, Ashima, 2003. "Budgetary processes: a political economy perspective," MPRA Paper 27786, University Library of Munich, Germany.
  3. Ashima Goyal, 2005. "“Incentives from Exchange Rate Regimes in an Institutional Context"," Macroeconomics Working Papers 22370, East Asian Bureau of Economic Research.

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