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Macroeconomic Policy and the Distribution of Growth Rates

  • Sirimaneetham, Vatcharin
  • Temple, Jonathan

We examine the view that high-quality macroeconomic policy is a necessary, but not sufficient, condition for economic growth. We first construct a new index of the quality of macroeconomic policy. We then directly compare growth rate distributions across countries with good and bad policies; use Bayesian methods to examine the partial correlation between policy and growth; and outline how growth and steady-state income levels might have differed, had all countries achieved good policy outcomes. One finding is that bad macroeconomic policies can be offset by other factors, but the fastest-growing countries in our sample all shared high-quality macroeconomic management.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5642.

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Date of creation: Apr 2006
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Handle: RePEc:cpr:ceprdp:5642
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