Crises and Government: Some Empirical Evidence

Contemporary Economic Policy (Forthcoming)

83 Pages Posted: 22 Aug 2013 Last revised: 31 Jul 2015

See all articles by Jamie Bologna Pavlik

Jamie Bologna Pavlik

Texas Tech University - Department of Agricultural and Applied Economics

Andrew T. Young

Texas Tech University - Rawls College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 2015

Abstract

We examine a panel of 70 countries during 1966-2010 and utilize Reinhart and Rogoff crisis dates to estimate the effects of crises on the size and scope of government over both 5-year and 10-year horizons. We also estimate cross-section regressions using 40-year (1970-2010) changes in government variables. In general, the estimated effects of crises on government size/scope are statistically insignificant. We report reasonably robust evidence that inflation and currency crises lead to decreases in the extent of government regulations throughout an economy over a 10-year horizon. Also, over the 40-year period, countries that spent more years in crisis are associated with weaker legal systems and property rights. The size and scope of government appears to be persistent to the extent that even crisis episodes fail to leave a significant mark upon them. A notable exception may be that, over 40-year periods, countries that spend more years in crisis are associated with weaker legal systems and property rights.

Keywords: sovereign debt crises, banking crises, currency crises, inflation crises, institutional quality, size of government, ratchet effect

JEL Classification: E02, O11, O43

Suggested Citation

Bologna Pavlik, Jamie and Young, Andrew T., Crises and Government: Some Empirical Evidence (July 2015). Contemporary Economic Policy (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2313846 or http://dx.doi.org/10.2139/ssrn.2313846

Jamie Bologna Pavlik

Texas Tech University - Department of Agricultural and Applied Economics ( email )

Suite 167, 2625 Memorial Circle
TTU Administration
Lubbock, TX 79409
United States

Andrew T. Young (Contact Author)

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

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