Techniques for dealing with reverse causality between institutions and economic performance

Luciana Cingolani () and Denis de Crombrugghe ()
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Luciana Cingolani: UNU-MERIT / MGSOG, Maastricht University
Denis de Crombrugghe: School of Business and Economics, Maastricht University

No 2012-034, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: This article provides a succinct review of the arguments stressing the mutual relationship between institutions and economic performance, and a scholarly account of some of the most popular econometric strategies used to minimize reversed causality problems in impact estimation. Among the techniques revisited we find the instrumental variables (IV) approach, distributed lags and vector autoregressions (VAR), quasi-experiments, and identification by heteroskedasticity (IH). Ultimately, the review is conceived as a methodological aide to researchers seeking to explore causal relationships through the use of the Institutional Profiles Database (IPD) produced by the Agence Francaise de Developpement (AFD).

Keywords: Institutions and growth; endogeneity; instrumental variables; dynamic analysis; identification; heteroskedasticity. (search for similar items in EconPapers)
JEL-codes: C33 C36 O42 P14 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2012034

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