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An Institutional Risk Analysis of the Kazakh Economy

Listed author(s):
  • Oliver Röhn
  • Sultan Orazbayev
  • Aslan Sarinzhipov

This paper investigates the impact of institutions or structural policies on the volatility of income or GDP per capita in transition countries and in Kazakhstan in particular. In the first part of the paper we compare Kazakhstan’s institutional framework with other transition economies based on a broad range of indicators. Using factor analytical tools to reduce the dimensionality of the indicator space we find that in general Kazakhstan’s institutional quality ranks among the lowest of the 24 transition countries investigated. Reform progress was mainly achieved in infrastructure. In the second part of the paper we employ state-of-the-art Bayesian Model Averaging (BMA) to identify institutional and macroeconomic policy areas that have the strongest impact on output volatility in transition economies. The analysis shows that good legal and administrative institutions can help smooth output volatility. Moreover, we also find that inflation and current account volatility and to a smaller extend exchange rate fluctuations are important determinants of output volatility.

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File URL: http://www.cesifo-group.de/DocDL/IfoWorkingPaper-70.pdf
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Paper provided by ifo Institute - Leibniz Institute for Economic Research at the University of Munich in its series ifo Working Paper Series with number 70.

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Date of creation: 2009
Handle: RePEc:ces:ifowps:_70
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  1. Aizenman, Joshua & Marion, Nancy, 1999. "Volatility and Investment: Interpreting Evidence from Developing Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 157-179, May.
  2. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
  3. Acemoglu, Daron & Johnson, Simon & Robinson, James & Thaicharoen, Yunyong, 2003. "Institutional causes, macroeconomic symptoms: volatility, crises and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 49-123, January.
  4. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-1151, December.
  5. Eicher, Theo S. & Schreiber, Till, 2010. "Structural policies and growth: Time series evidence from a natural experiment," Journal of Development Economics, Elsevier, vol. 91(1), pages 169-179, January.
  6. Thorsten Beck & Luc Laeven, 2006. "Institution building and growth in transition economies," Journal of Economic Growth, Springer, vol. 11(2), pages 157-186, June.
  7. Leamer, Edward E, 1983. "Let's Take the Con Out of Econometrics," American Economic Review, American Economic Association, vol. 73(1), pages 31-43, March.
  8. Fernandez, Carmen & Ley, Eduardo & Steel, Mark F. J., 2001. "Benchmark priors for Bayesian model averaging," Journal of Econometrics, Elsevier, vol. 100(2), pages 381-427, February.
  9. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
  10. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  11. Malik, Adeel & Temple, Jonathan R.W., 2009. "The geography of output volatility," Journal of Development Economics, Elsevier, vol. 90(2), pages 163-178, November.
  12. Agenor, Pierre-Richard & McDermott, C John & Prasad, Eswar S, 2000. "Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts," World Bank Economic Review, World Bank Group, vol. 14(2), pages 251-285, May.
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