Medium Term Growth: The Role of Policies and Institutions

in Frontiers of Economics and Globalization, Series ed. Olivier de La Grandville; foreword by Robert E. Solow. Emerald 2011, pp. 319 – 366.

84 Pages Posted: 14 Jun 2019

See all articles by Michal Jerzmanowski

Michal Jerzmanowski

Clemson University - John E. Walker Department of Economics

David Cuberes

University of Sheffield

Date Written: July 15, 2011

Abstract

[enter Abstract Body]In this chapter, we review the recent and growing literature on medium-term growth patterns. This strand of research emerged from the realization that for most countries economic development is a highly unstable process; over a few decades, a typical country enjoys periods of rapid growth as well episodes of stagnation and economic decline. This approach highlights the complex nature of growth and implies that studying transitions between periods of fast growth, stagnation, and collapse is essential for understanding the process of long-run growth. We document recent efforts to characterize and study such growth transitions. We also update and extend some of our earlier research. Specifically, we use historical data from Maddison to confirm a link between political institutions and propensity to experience large swings in growth. We also study the role of institutions and macroeconomic policies, such as inflation, openness to trade, size of government, and real exchange rate overvaluation, in the context of growth transitions. We find surprisingly complex effects of some policies. For example, openness to trade makes fast growth more likely but also increase the frequency of crises. The size of government reduces the likelihood of fast miracle-like growth while at the same time limiting the risk of stagnation. Moreover, these effects are nonlinear and dependent on the quality of institutions. We conclude by highlighting potentially promising areas for future research.

Keywords: economic growth, medium term growth, macro policies, institutions and growth, regime switching

JEL Classification: O11, O40, O43, O47, E50, E60

Suggested Citation

Jerzmanowski, Michal and Cuberes, David, Medium Term Growth: The Role of Policies and Institutions (July 15, 2011). in Frontiers of Economics and Globalization, Series ed. Olivier de La Grandville; foreword by Robert E. Solow. Emerald 2011, pp. 319 – 366.. Available at SSRN: https://ssrn.com/abstract=3397289

Michal Jerzmanowski (Contact Author)

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

Clemson, SC 29634
United States

David Cuberes

University of Sheffield ( email )

9 Mappin Street
Sheffield, S1 4DT
UNITED KINGDOM

HOME PAGE: http://merlin.fae.ua.es/cuberes/

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