Explaining policy volatility in developing countries

Vatcharin Sirimaneetham

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

Abstract: This paper studies the causes of policy volatility in developing countries during 1970-1999. To construct composite policy volatility indicators, the paper applies a robust principal components analysis to Washington Consensus policy variables. The results suggest three dimensions of policy volatility: fiscal, macroeconomic and development policies. The paper shows that more stable macroeconomic policy is associated with higher income growth, before turning to the determinants of volatility. Using a Bayesian approach which addresses the model uncertainty problem, the paper finds that macroeconomic policy is more volatile in countries that adopt a presidential system, have weaker political constraints, where government stability is lower, and that are former British colonies. Adopting a parliamentary regime helps to stabilize policy.

Keywords: policy volatility; economic growth; Bayesian model averaging; principal components. (search for similar items in EconPapers)
JEL-codes: C11 O11 O40 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2006-01
New Economics Papers: this item is included in nep-dev and nep-lam
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.bristol.ac.uk/efm/media/workingpapers/w ... pdffiles/dp06583.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bri:uobdis:06/583

Access Statistics for this paper

More papers in Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK
Bibliographic data for series maintained by Vicky Jackson ().