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Dictatorship, Democracy and Institutions: Macropolicy in China and India

  • Ashima Goyal

    ()

  • A. K. Jha

We explore the hypothesis that macroeconomic polices are influenced by political structure, through a systematic comparison of reform period macroeconomic policy choices and outcomes, in China and India. One decade lagged Indian reform in the context of similar economic and very different political structures offers a powerful natural experiment. Chinese low but positive real interest rates, facilitated by greater exchange rate volatility, and high infrastructure investment allowed it to outperform India in its first post reform decade. We find political structure did lead to specific inefficiencies in macroeconomic outcomes but macro-institutional changes exist that can improve policy. More openness under similar labor endowments give both countries the opportunity to commit to more effective, stable yet stimulatory, macroeconomic institutions and policies.

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Paper provided by eSocialSciences in its series Working Papers with number id:264.

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Date of creation: Nov 2005
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Handle: RePEc:ess:wpaper:id:264
Note: Working Papers
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  1. Marc Quintyn & Bernard Laurens & Hassanali Mehran & Tom Nordman, 1996. "Monetary and Exchange System Reforms in China: An Experiment in Gradualism," IMF Occasional Papers 141, International Monetary Fund.
  2. Djankov, Simeon & Glaeser, Edward & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2003. "The new comparative economics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 595-619, December.
  3. Allan Drazen, 1996. "The political economy of delayed reform," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 1(1), pages 25-46.
  4. Goyal, Ashima, 1999. "The Political Economy of the Revenue Deficit," MPRA Paper 29980, University Library of Munich, Germany.
  5. William Easterly & Ross Levine, 2002. "Tropics, Germs, and Crops: How Endowments Influence Economic Development," NBER Working Papers 9106, National Bureau of Economic Research, Inc.
  6. Liu, Xiaming & Wang, Chengang & Wei, Yingqi, 2001. "Causal links between foreign direct investment and trade in China," China Economic Review, Elsevier, vol. 12(2-3), pages 190-202.
  7. Goyal, Ashima, 2002. "Coordinating monetary and fiscal policies: a role for rules?," MPRA Paper 29200, University Library of Munich, Germany.
  8. Terry Sicular, 1998. "Capital Flight and Foreign Investment: Two Tales From China and Russia," The World Economy, Wiley Blackwell, vol. 21(5), pages 589-602, 07.
  9. Yun-Wing Sung, 1996. "Chinese Outward Investment in Hong Kong: Trends, Prospects and Policy Implications," OECD Development Centre Working Papers 113, OECD Publishing.
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