IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Looking at the facts : what we know about policy and growth from cross-country analysis

  • Levine, Ross
  • Zervos, Sara

What has the profession learned from cross-country regressions about the links between long-run growth and indicators of fiscal, monetary, trade, financial, and exchange-rate policies? The authors find that: indicators of financial development are strongly associated with long-run growth; other individual policy indicators are only weakly linked to growth; and it is particularly difficult to find a consistent relationship between inflation and long-run growth. For example, the inclusion or exclusion of one or two countries (Nicaragua and Uganda) out of more than 100 countries in the sample can lead to reaching three quite different conclusions: (1) that only very high inflation is bad for growth; (2) that very high inflation in itself is not bad for growth, but small increases in inflation in moderate-inflation countries slow growth; or (3) that inflation is unrelated to growth. The connections between policy indicators and growth are quite sensitive to slight alterations in the right-hand-side variables and to small changes in the sample of countries. And the daunting array of methodological problems limiting the ability to interpret cross-country regressions implies that, at best, they suggest interesting empirical regularities. Cross-country regressions should not be used to predict by how much long-run growth will change when policies change. But beliefs about policy and growth that are not supported by cross-country evidence will tend to be viewed skeptically. So, future work on the policy-growth nexus should integrate broad cross-country analyses with country case studies and investigations of specific firms.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/1993/03/01/000009265_3961004084236/Rendered/PDF/multi_page.pdf
Download Restriction: no

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1115.

as
in new window

Length:
Date of creation: 31 Mar 1993
Date of revision:
Handle: RePEc:wbk:wbrwps:1115
Contact details of provider: Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. William Easterly & Sergio Rebelo, 1993. "Fiscal Policy and Economic Growth: An Empirical Investigation," NBER Working Papers 4499, National Bureau of Economic Research, Inc.
  2. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 531-55, May.
  3. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  4. Leamer, Edward E, 1983. "Let's Take the Con Out of Econometrics," American Economic Review, American Economic Association, vol. 73(1), pages 31-43, March.
  5. Orphanides, Athanasios & Solow, Robert M., 1990. "Money, inflation and growth," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 1, chapter 6, pages 223-261 Elsevier.
  6. Jeremy Greenwood & Boyan Jovanovic, 1989. "Financial Development, Growth, and the Distribution of Income," NBER Working Papers 3189, National Bureau of Economic Research, Inc.
  7. Bencivenga, Valerie R & Smith, Bruce D, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 195-209, April.
  8. Summers, Robert & Heston, Alan, 1988. "A New Set of International Comparisons of Real Product and Price Levels Estimates for 130 Countries, 1950-1985," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(1), pages 1-25, March.
  9. Leamer, Edward E, 1985. "Sensitivity Analyses Would Help," American Economic Review, American Economic Association, vol. 75(3), pages 308-13, June.
  10. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  11. Grossman, G.M. & Helpman, E., 1989. "Trade; Innovation; And Growth," Papers 154, Princeton, Woodrow Wilson School - Public and International Affairs.
  12. McAleer, Michael & Pagan, Adrian R & Volker, Paul A, 1985. "What Will Take the Con out of Econometrics?," American Economic Review, American Economic Association, vol. 75(3), pages 293-307, June.
  13. Roubini, N. & Sala-I-Martin, X., 1991. "Financial development , the Trade Regime and Economic Growth," Papers 646, Yale - Economic Growth Center.
  14. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  15. Fischer, Stanley, 1979. "Anticipations and the Nonneutrality of Money," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 225-52, April.
  16. De Gregorio, Jose, 1992. "The effects of inflation on economic growth : Lessons from Latin America," European Economic Review, Elsevier, vol. 36(2-3), pages 417-425, April.
  17. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
  18. Larry E. Jones & Rodolfo Manuelli, 1990. "A Convex Model of Equilibrium Growth," NBER Working Papers 3241, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1115. 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: (Roula I. Yazigi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.