Policy Uncertainty, Persistence and Growth
This paper explores links between policy uncertainty and growth. It provides evidence on the correlation between policy uncertainty and per capita real GDP for 46 developing countries over the 1970-85 period. Cross-section regressions on growth suggest that after accounting for standard variables from the endogenous growth literature, policy uncertainty and growth are correlated. The importance of the correlation and even its sign depend on the particular policy and on the geographical region examined. One channel through which policy uncertainty may affect growth is the investment channel. Using an endogenous growth model where domestic investment is characterized by irreversibilities and policy fluctuates between a high and lowtax regime, we show that the gap between the two regimes and the persistence of a regime jointly determine the pattern of investment and growth. Policy uncertainty in the absence of persistence does not affect long run growth.
|Date of creation:||Sep 1991|
|Publication status:||published as Review of International Economics, June 1993|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stern, Nicholas, 1989. "The Economics of Development: A Survey," Economic Journal, Royal Economic Society, vol. 99(397), pages 597-685, September.
- Krugman, Paul, 1987. "The narrow moving band, the Dutch disease, and the competitive consequences of Mrs. Thatcher : Notes on trade in the presence of dynamic scale economies," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 41-55, October.
- Edwards, Sebastian & Tabellini, Guido, 1991.
"Explaining fiscal policies and inflation in developing countries,"
Journal of International Money and Finance,
Elsevier, vol. 10(1, Supple), pages 16-48, March.
- Sebastian Edwards & Guido Tabellini, 1990. "Explaining Fiscal Policies and Inflation in Developing Countries," NBER Working Papers 3493, National Bureau of Economic Research, Inc.
- Robert J. Barro, 1991.
"Economic Growth in a Cross Section of Countries,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 106(2), pages 407-443.
- Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
- Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
- Dani Rodrik, 1989.
"Policy Uncertainty and Private Investment in Developing Countries,"
NBER Working Papers
2999, National Bureau of Economic Research, Inc.
- Rodrik, Dani, 1991. "Policy uncertainty and private investment in developing countries," Journal of Development Economics, Elsevier, vol. 36(2), pages 229-242, October.
- Pindyck, Robert S, 1988.
"Irreversible Investment, Capacity Choice, and the Value of the Firm,"
American Economic Review,
American Economic Association, vol. 78(5), pages 969-985, December.
- Pindyck, Robert S., 1986. "Irreversible investment, capacity choice, and the value of the firm," Working papers 1802-86., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Robert S. Pindyck, 1986. "Irreversible Investment, Capacity Choice, and the Value of the Firm," NBER Working Papers 1980, National Bureau of Economic Research, Inc.
- A. Sandmo, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Oxford University Press, vol. 37(3), pages 353-360.
- Meir Kohn & Nancy Peregrim Marion, 1988.
"The Implications of Knowledge-Based Growth for the Optimality of Open Capital Markets,"
NBER Working Papers
2487, National Bureau of Economic Research, Inc.
- Meir Kohn & Nancy Marion, 1992. "The Implications of Knowledge-Based Growth for the Optimality of Open Capital Markets," Canadian Journal of Economics, Canadian Economics Association, vol. 25(4), pages 865-883, November.
- Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-247, February.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- Paul M Romer, 1999.
"Increasing Returns and Long-Run Growth,"
Levine's Working Paper Archive
2232, David K. Levine.
- Ben S. Bernanke, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, Oxford University Press, vol. 98(1), pages 85-106.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:3848. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.