Uncertainty and growth: the case of transition economies
AbstractThe paper investigates the relationship between fundamental uncertainty, a recurrent theme in post-Keynesian economic literature, and economic performance in transition economies. Uncertainty in the transitional economic environment is enhanced by factors such as institutional transformation, political and social instability, and legacies of the past. To capture the changes in the levels of uncertainty, the authors have designed the uncertainty index, based on a weighted selection of Heritage Foundation and Freedom House data. The correlation between the uncertainty index and growth is strong and clearly negative. Panel data analysis based on a growth model, supplemented by variables to simulate transitional cycle, and performed on a sample of transition economies for the period 1995-2002, confirms that uncertainty has a negative impact on economic growth.
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Bibliographic InfoPaper provided by SCEME in its series SCEME Working Papers: Advances in Economic Methodology with number 013/2007.
Length: 32 pages
Date of creation: Jan 2007
Date of revision:
uncertainty; economic transition; institutions; economic growth; foreign direct investment;
Find related papers by JEL classification:
- B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Institutional; Evolutionary
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
- P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects
- P30 - Economic Systems - - Socialist Institutions and Their Transitions - - - General
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