Macroeconomic risk and the size of government- do globalisation andinstitutions matter?
AbstractWe present an empirical model where output growth volatility and government expenditure are jointly endogenous and both are affected by policies and institutions. We ¯nd that output volatility increases government expenditure, but higher expenditure, causes greater out-put volatility. This suggests that discretionary government intervention is destabilising. Trade openness drives both higher expenditure and greater output volatility. Financial openness instead disciplines the size of government. Political institutions that strengthen policymaker's ac-countability towards the electorate result in lower expenditure and, in-directly, contribute to output stabilisation. Institutional arrangements concerning the central bank are not neutral: a more independent centralbank calls for lower output volatility.
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Bibliographic InfoPaper provided by School of Economics, University of Queensland, Australia in its series Discussion Papers Series with number 394.
Date of creation: 2009
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- Chinn,M.D. & Ito,H., 2005.
"What matters for financial development? : capital controls, institutions, and interactions,"
Working papers, Wisconsin Madison - Social Systems
4, Wisconsin Madison - Social Systems.
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- Chinn, Menzie David & Ito, Hiro, 2005. "What Matters for Financial Development? Capital Controls, Institutions, and Interactions," Santa Cruz Center for International Economics, Working Paper Series, Center for International Economics, UC Santa Cruz qt5pv1j341, Center for International Economics, UC Santa Cruz.
- Menzie D. Chinn & Hiro Ito, 2005. "What Matters for Financial Development? Capital Controls, Institutions, and Interactions," NBER Working Papers 11370, National Bureau of Economic Research, Inc.
- Atish R. Ghosh & Anne-Marie Gulde & Holger C. Wolf, 2003. "Exchange Rate Regimes: Choices and Consequences," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262072408, December.
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