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Institutional causes of macroeconomic volatility

  • Levon Barseghyan
  • Riccardo DiCecio

In this paper we investigate the relation between the quality of institutions and macroeconomic volatility. Using instrumental variable regressions, we show that higher barriers to entry lead to higher volatility. In particular, a one standard deviation increase in entry costs increases the standard deviation of output growth by roughly 40% of its average value in our sample. To the contrary, property rights protection has no statistically significant effect on volatility.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2008-021.

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Date of creation: 2008
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Handle: RePEc:fip:fedlwp:2008-021
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