Governance structures and the durability of economic reforms; evidence from inflation stabilizations

Richard Ball and Gordon Rausser

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: This paper investigates the relationship between a country's political-economic and institutional environment, and its ability to implement sustainable economic reform programs. The policy issue on which the study focuses is inflation stabilization. It consists principally of econometric estimations of the relationship between the success of stabilizations in a large sample of countries and several political and economic explanatory variables. The hypotheses tested are drawn both from the recent macroeconomic literature on policy credibility and from political science. The major findings include the following: (1) Despite the "conventional wisdom" to the contrary, political repression does not appear to be an effective means for implementing sustainable stabilization policies. Durable economic reforms and political freedoms appear to be complementary. (2) As has been previously argued theoretically and demonstrated empirically, political instability is detrimental to policy reform. (3) The political will and popular consensus for stabilization policies are enhanced during a severe economic crisis. (4) There is weak evidence that intervention by the IMF, rather than supporting reform programs, can undermine their credibility.

Keywords: economic conditions; economic policy; macroeconomics; Social and Behavioral Sciences (search for similar items in EconPapers)
Date: 1993-12-01
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Journal Article: Governance structures and the durability of economic reforms: Evidence from inflation stabilizations (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:cdl:agrebk:qt7qt9r513

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