Macroeconomic Policy and the Distribution of Growth Rates

52 Pages Posted: 19 Jul 2006

See all articles by Jonathan R.W. Temple

Jonathan R.W. Temple

Centre for Economic Policy Research (CEPR)

Vatcharin Sirimaneetham

University of Bristol - Department of Economics

Date Written: April 2006

Abstract

We examine the view that high-quality macroeconomic policy is a necessary, but not sufficient, condition for economic growth. We first construct a new index of the quality of macroeconomic policy. We then directly compare growth rate distributions across countries with good and bad policies; use Bayesian methods to examine the partial correlation between policy and growth; and outline how growth and steady-state income levels might have differed, had all countries achieved good policy outcomes. One finding is that bad macroeconomic policies can be offset by other factors, but the fastest-growing countries in our sample all shared high-quality macroeconomic management.

Keywords: Macroeconomic policy, economic growth, Washington Consensus, Bayesian Model Averaging, counterfactuals

JEL Classification: O23, O40

Suggested Citation

Temple, Jonathan R.W. and Sirimaneetham, Vatcharin, Macroeconomic Policy and the Distribution of Growth Rates (April 2006). CEPR Discussion Paper No. 5642. Available at SSRN: https://ssrn.com/abstract=918281

Jonathan R.W. Temple (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Vatcharin Sirimaneetham

University of Bristol - Department of Economics ( email )

8 Woodland Road
Bristol BS8 ITN
United Kingdom

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