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Acceleration, Stagnation and Crisis: the Role of Policies and Institutions

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  • Jerzmanowski, Michal

Abstract

In this paper we study long run economic growth as a sequence of accelerations, slowdowns and crises, and estimate the role of institutions and macroeconomic policies in determining this sequence. We analyze the joint effect of policies and institutions on the frequency of the four growth regimes: stable growth, stagnation, crisis and miracle-like fast growth. The results confirm the importance of institutions for growth but also show that macro-policies; inflation, trade openness, size of government and real exchange rate overvaluation matter for the growth process, even after controlling for institutional quality. Importantly, some policies affect regimes differentially; for example, trade makes episodes of fast growth more likely but also increases the frequency of crises. Finally, the effects of policies are nonlinear and dependent on the quality of institutions. For example, government spending reduces growth in countries with good institutions but can increase it when institutions are weak.

Suggested Citation

  • Jerzmanowski, Michal, 2011. "Acceleration, Stagnation and Crisis: the Role of Policies and Institutions," MPRA Paper 29666, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:29666
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    File URL: https://mpra.ub.uni-muenchen.de/29666/1/MPRA_paper_29666.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Kerekes, Monika, 2012. "Growth miracles and failures in a Markov switching classification model of growth," Journal of Development Economics, Elsevier, vol. 98(2), pages 167-177.
    2. Marcin Grela & Aleksandra Majchrowska & Tomasz Michałek & Jakub Mućk & Agnieszka Stążka-Gawrysiak & Grzegorz Tchorek & Marcin Wagner, 2017. "Is Central and Eastern Europe converging towards the EU-15?," NBP Working Papers 264, Narodowy Bank Polski, Economic Research Department.
    3. David Cuberes & Michał Jerzmanowski, 2009. "Democracy, Diversification and Growth Reversals," Economic Journal, Royal Economic Society, vol. 119(540), pages 1270-1302, October.
    4. Richard Jong-A-Pin & Jakob Haan, 2011. "Political regime change, economic liberalization and growth accelerations," Public Choice, Springer, vol. 146(1), pages 93-115, January.
    5. Pál Czeglédi, 2014. "The theory of interventionism as an Austrian theory of slowdowns," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 27(4), pages 419-449, December.

    More about this item

    Keywords

    economic growth; growth accelerations; macroeconomic policies; institutions;

    JEL classification:

    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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