Institutions and macroeconomic performance: core versus periphery countries in the Eurozone

Tryfonas Christou, Apostolis Philippopoulos and Vanghelis Vassilatos

Oxford Economic Papers, 2021, vol. 73, issue 4, 1634-1660

Abstract: We incorporate institutions into a neoclassical growth model so as to account for macroeconomic differences, as in the data, in 12 Eurozone countries. Modelling institutions in a generic way, we assume that weak institutions are reflected in ill-enforced property rights. When we calibrate and solve the model for each country separately, our results are: (i) including weak institutions helps the model vis-à-vis the data more in the periphery than in the core of the Eurozone; (ii) institutional failures, and their adverse effects on incentives, are worse in the periphery countries and this contributes in explaining lower long-term growth and higher output volatility in these countries; (iii) the same shock affects different countries differently depending on their institutional structure and the mix of fiscal policies; and (iv) counterfactual scenarios imply that periphery countries with weak institutions could gain a lot had their institutional quality been like that in the core.

JEL-codes: D7 E32 E65 O43 O57 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://hdl.handle.net/10.1093/oep/gpab037 (application/pdf)
Access to full text is restricted to subscribers.

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:oup:oxecpp:v:73:y:2021:i:4:p:1634-1660.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Oxford Economic Papers is currently edited by James Forder and Francis J. Teal

More articles in Oxford Economic Papers from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().