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

51 Pages Posted: 25 Mar 2011

See all articles by Michal Jerzmanowski

Michal Jerzmanowski

Clemson University - John E. Walker Department of Economics

Date Written: March 17, 2011

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.

Keywords: economic growth, growth accelerations, macroeconomic policies, institutions

JEL Classification: O11, O23, O24, O43

Suggested Citation

Jerzmanowski, Michal, Acceleration, Stagnation and Crisis: The Role of Policies and Institutions (March 17, 2011). Available at SSRN: https://ssrn.com/abstract=1788910 or http://dx.doi.org/10.2139/ssrn.1788910

Michal Jerzmanowski (Contact Author)

Clemson University - John E. Walker Department of Economics ( email )

Clemson, SC 29634
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
53
Abstract Views
530
rank
506,402
PlumX Metrics