Explaining the dynamics of stagnation: An empirical examination of the North, Wallis and Weingast approach

Bluhm, Richard, De Crombrugghe, Denis and Szirmai, Adam (2012). Explaining the dynamics of stagnation: An empirical examination of the North, Wallis and Weingast approach. UNU-MERIT.

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  • Author Bluhm, Richard
    De Crombrugghe, Denis
    Szirmai, Adam
    Title Explaining the dynamics of stagnation: An empirical examination of the North, Wallis and Weingast approach
    Publication Date 2012
    Place of Publication Maastricht
    Publisher UNU-MERIT
    Pages 46
    Abstract This paper analyzes periods of economic stagnation in a panel of countries. We test if stagnation episodes are predicted by institutional factors and external/internal shocks, as is implied by recent theoretical contributions, and compare the impacts of these variables with those of traditional macroeconomic variables. We examine the determinants of stagnation episodes using multivariate dynamic linear models, fixed-effects logit models, and dynamic random effects probit models. In addition, we analyze whether the included variables have different impacts on the onset of a stagnation episode than on its continuation. We find that inflation, negative regime changes, real exchange rate undervaluation, financial openness, and trade openness explain the incidence of stagnation spells. Only in the case of trade openness, there is robust evidence of a differential impact; it reduces the probability of falling into a stagnation spell, but has a weaker effect within a spell. All models account for unobserved heterogeneity and exhibit a moderate degree of positive state-dependence.
    Keyword Growth episodes
    Stagnation
    Institutions
    Dynamic panel data
    JEL O11
    O43
    C25
    Copyright Holder UNU-MERIT
    Copyright Year 2012
    Copyright type Creative commons
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    Created: Wed, 11 Dec 2013, 17:24:02 JST