Acceleration, Stagnation and Crisis: the Role of Policies and Institutions

Michal Jerzmanowski

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we study long run economic growth as a sequence of accelerations, slowdowns and crises, and estimate the role of institutions and macroeconomic policies in determining this sequence. We analyze the joint effect of policies and institutions on the frequency of the four growth regimes: stable growth, stagnation, crisis and miracle-like fast growth. The results confirm the importance of institutions for growth but also show that macro-policies; inflation, trade openness, size of government and real exchange rate overvaluation matter for the growth process, even after controlling for institutional quality. Importantly, some policies affect regimes differentially; for example, trade makes episodes of fast growth more likely but also increases the frequency of crises. Finally, the effects of policies are nonlinear and dependent on the quality of institutions. For example, government spending reduces growth in countries with good institutions but can increase it when institutions are weak.

Keywords: economic growth; growth accelerations; macroeconomic policies; institutions (search for similar items in EconPapers)
JEL-codes: O11 O23 O24 O43 (search for similar items in EconPapers)
Date: 2011-03-16
New Economics Papers: this item is included in nep-fdg
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:29666

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