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The effect of transparency on output volatility

Listed author(s):
  • Andrew Williams

    ()

Previous research has shown that democracies, on average, produce more stable output than non-democracies. In this paper, I argue that it is the political and economic transparency that arises out of democracies that leads to this relative stability in output growth, because the ability of a country to adjust and adapt to shocks, be they internal or external, is more pronounced in countries where the flows of information are better. Using data from 1980–2009, I show that once transparency is incorporated into the analysis democracy actually appears to increase volatility, whilst transparency is seen to have a significant dampening effect on volatility. This result is remarkably robust to the inclusion of many additional variables, alternative definitions of democracy and model specifications. Copyright Springer-Verlag Berlin Heidelberg 2014

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File URL: http://hdl.handle.net/10.1007/s10101-013-0138-x
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Article provided by Springer in its journal Economics of Governance.

Volume (Year): 15 (2014)
Issue (Month): 2 (May)
Pages: 101-129

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Handle: RePEc:spr:ecogov:v:15:y:2014:i:2:p:101-129
DOI: 10.1007/s10101-013-0138-x
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