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The effect of transparency on output volatility

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  • Andrew Williams

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Abstract

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

Suggested Citation

  • Andrew Williams, 2014. "The effect of transparency on output volatility," Economics of Governance, Springer, vol. 15(2), pages 101-129, May.
  • Handle: RePEc:spr:ecogov:v:15:y:2014:i:2:p:101-129
    DOI: 10.1007/s10101-013-0138-x
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    More about this item

    Keywords

    Transparency; Output volatility; Democracy; Institutions; H11; O17; O43;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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