Techniques for dealing with reverse causality between institutions and economic performance

Cingolani, Luciana and De Crombrugghe, Denis (2012). Techniques for dealing with reverse causality between institutions and economic performance. UNU-MERIT.

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  • Sub-type Working paper
    Author Cingolani, Luciana
    De Crombrugghe, Denis
    Title Techniques for dealing with reverse causality between institutions and economic performance
    Publication Date 2012
    Place of Publication Maastricht
    Publisher UNU-MERIT
    Pages 32
    Abstract This article provides a succinct review of the arguments stressing the mutual relationship between institutions and economic performance, and a scholarly account of some of the most popular econometric strategies used to minimize reversed causality problems in impact estimation. Among the techniques revisited we find the instrumental variables (IV) approach, distributed lags and vector autoregressions (VAR), quasi-experiments, and identification by heteroskedasticity (IH). Ultimately, the review is conceived as a methodological aide to researchers seeking to explore causal relationships through the use of the Institutional Profiles Database (IPD) produced by the Agence Francaise de Developpement (AFD).
    Keyword Institutions and growth
    Endogeneity
    Instrumental variables
    Dynamic analysis
    Identification through heteroskedasticity
    JEL O42
    C33
    C36
    P14
    Copyright Holder UNU-MERIT
    Copyright Year 2012
    Copyright type Creative commons
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    Created: Wed, 11 Dec 2013, 17:24:11 JST