Towards more resilient economies: the role of well-functioning economic structures

David Sondermann

No 1984, Working Paper Series from European Central Bank

Abstract: Economic resilience is essential to better withstand adverse shocks and reduce the economic costs associated with them. We propose different measures of resilience and empirically gauge how countries differ in their shock absorption capacity conditioning on the quality of their economic structures. The paper finds robust evidence that sound labour and product markets, framework conditions and political institutions increase the resilience towards adverse shocks and reduce the incidence of crisis more generally. In the presence of a common shock, a country with weaker economic structures can on average suffer up to twice the output loss in a given year compared to the country at frontier of institutional parameters. In a similar fashion, the likelihood of a severe economic crisis is reduced significantly if a country exhibits most flexible and adaptable institutions. The above exercises can be used to establish a governance process towards more resilient economic structures (as e.g. suggested for the euro area in the so?called Five Presidents JEL Classification: E32, L50, J21

Keywords: common shocks; economic resilience; economic structures; institutions (search for similar items in EconPapers)
Date: 2016-11
Note: 943715
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Towards more resilient economies: The role of well-functioning economic structures (2018)
Working Paper: Towards More Resilient Economies: The role of well-functioning economic structures (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20161984

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