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

  • Jerzmanowski, Michal

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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29666.

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Date of creation: 16 Mar 2011
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Handle: RePEc:pra:mprapa:29666
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  1. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  2. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
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  6. Acemoglu, Daron, 2005. "Politics and economics in weak and strong states," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1199-1226, October.
  7. Dani Rodrik, 1996. "Why Do More Open Economies Have Bigger Governments?," NBER Working Papers 5537, National Bureau of Economic Research, Inc.
  8. Roberto Chang, & Linda Kaltani & Norman Loayza, 2006. "Openness Can be Good for Growth: The Role of Policy Complementarities," Working Papers Central Bank of Chile 373, Central Bank of Chile.
  9. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  10. Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2005. "Income and Democracy," CEPR Discussion Papers 5273, C.E.P.R. Discussion Papers.
  11. repec:reg:rpubli:271 is not listed on IDEAS
  12. Easterly, William & Kremer, Michael & Pritchett, Lant & Summers, Lawrence H., 1993. "Good policy or good luck?: Country growth performance and temporary shocks," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 459-483, December.
  13. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
  14. Aghion, Philippe & Bacchetta, Philippe & Ranciere, Romain & Rogoff, Kenneth S., 2009. "Exchange Rate Volatility and Productivity Growth: The Role of Financial Development," Scholarly Articles 12490419, Harvard University Department of Economics.
  15. Barro, Robert J, 1996. " Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
  16. Acemoglu, Daron & Johnson, Simon & Robinson, James A & Thaicharoen, Yunyong, 2002. "Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth," CEPR Discussion Papers 3575, C.E.P.R. Discussion Papers.
  17. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
  18. Jerzmanowski, Michal, 2006. "Empirics of hills, plateaus, mountains and plains: A Markov-switching approach to growth," Journal of Development Economics, Elsevier, vol. 81(2), pages 357-385, December.
  19. Loayza, Norman V. & Oviedo, Ana Maria & Serven, Luis, 2005. "The impact of regulation on growth and informality - cross-country evidence," Policy Research Working Paper Series 3623, The World Bank.
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