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The Deep Historical Roots of Macroeconomic Volatility

Listed author(s):
  • Sam Hak Kan Tang

    (Business School, University of Western Australia)

  • Charles Ka Yui Leung

    (Department of Economics and Finance, City University of Hong Kong)

We present cross-country evidence that a country’s macroeconomic volatility, measured either by the standard deviation of output growth or the occurrence of trend-growth breaks, is significantly affected by the country’s historical variables. In particular, countries with longer histories of state-level political institutions experience less macroeconomic volatility in post-war periods. In addition, we show that political instability, discretionary fiscal policy, financial underdevelopment, and a lack of foreign direct investment are the main mechanisms by which state history affects the macroeconomic volatility of modern states.

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File URL: http://ecompapers.biz.uwa.edu.au/paper/PDF%20of%20Discussion%20Papers/2014/14-31%20The%20Deep%20Historical%20Roots%20of%20Macroeconomic%20Volatility.pdf
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Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 14-31.

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Length: 58 pages
Date of creation: 2014
Handle: RePEc:uwa:wpaper:14-31
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Web page: http://www.business.uwa.edu.au/school/disciplines/economics

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