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Macroeconomic Volatility and Economic Development

In: The Political Dimension of Economic Growth

Author

Listed:
  • Michael Gavin

    (Inter-American Development Bank)

  • Ricardo Hausmann

    (Inter-American Development Bank)

Abstract

In recent years the economic costs imposed by a volatile macroeconomic environment have come into increasingly clear focus. Recent research suggests that a volatile macroeconomic environment leads to significantly lower rates of investment and economic growth, undermines educational attainment, harms the distribution of income, and increases poverty. While the precise magnitude of these costs and the mechanisms through which they occur should, and undoubtedly will, remain the focus of further research for some time, the evidence is, in our view, compelling enough to justify research efforts directed at understanding why developing economies are so volatile, and what can be done to reduce the costs of this volatility. In this chapter we synthesize several lines of research that have been under way in the Inter-American Development Bank (IADB) on these questions. While none of these research projects has as its explicit focus the role of institutional factors in economic development, taken together we think they provide a preliminary but nevertheless significant message on linkages between governmental institutions, macroeconomic stability, and economic development.

Suggested Citation

  • Michael Gavin & Ricardo Hausmann, 1998. "Macroeconomic Volatility and Economic Development," International Economic Association Series, in: Silvio Borner & Martin Paldam (ed.), The Political Dimension of Economic Growth, chapter 5, pages 97-116, Palgrave Macmillan.
  • Handle: RePEc:pal:intecp:978-1-349-26284-7_5
    DOI: 10.1007/978-1-349-26284-7_5
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    Citations

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    Cited by:

    1. César Calderón & Roberto Duncan & Klaus Schmidt-Hebbel, 2016. "Do Good Institutions Promote Countercyclical Macroeconomic Policies?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(5), pages 650-670, October.
    2. César Calderón & Roberto Duncan & Klaus Schmidt-Hebbel, 2004. "The role of credibility in the cyclical properties of macroeconomic policies in emerging economies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 140(4), pages 613-633, December.
    3. Sèna Kimm Gnangnon, 2024. "Export product quality and inclusivity in developing countries," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 32(3), pages 807-843, July.
    4. Miklós Koren & Silvana Tenreyro, 2007. "Volatility and Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(1), pages 243-287.
    5. Calderon, Cesar & Schmidt-Hebbel, Klaus, 2003. "Macroeconomic policies and performance in Latin America," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 895-923, December.
    6. Malik, Adeel & Temple, Jonathan R.W., 2009. "The geography of output volatility," Journal of Development Economics, Elsevier, vol. 90(2), pages 163-178, November.
    7. Mariña Martínez-Malvar & Laura Baselga-Pascual, 2020. "Bank Risk Determinants in Latin America," Risks, MDPI, vol. 8(3), pages 1-20, September.
    8. Tinevimbo Santu Chokuda & Njabulo Nkomazana & Wilford Mawanza, 2017. "A Bank Failure Prediction Model for Zimbabwe: A Corporate Governance Perspective," Journal of Economics and Behavioral Studies, AMH International, vol. 9(1), pages 207-216.
    9. Malik, Adeel & Temple, Jonathan R.W., 2009. "The geography of output volatility," Journal of Development Economics, Elsevier, vol. 90(2), pages 163-178, November.

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