Skip to main content Accessibility help
×
Home
Hostname: page-component-544b6db54f-n9d2k Total loading time: 0.185 Render date: 2021-10-24T04:13:18.940Z Has data issue: true Feature Flags: { "shouldUseShareProductTool": true, "shouldUseHypothesis": true, "isUnsiloEnabled": true, "metricsAbstractViews": false, "figures": true, "newCiteModal": false, "newCitedByModal": true, "newEcommerce": true, "newUsageEvents": true }

THE DYNAMICS OF STAGNATION: A PANEL ANALYSIS OF THE ONSET AND CONTINUATION OF STAGNATION

Published online by Cambridge University Press:  12 April 2016

Richard Bluhm*
Affiliation:
Leibniz Universität Hannover and UNU-MERIT, Maastricht University
Denis de Crombrugghe
Affiliation:
Maastricht University
Adam Szirmai
Affiliation:
UNU-MERIT, Maastricht University
*
Address correspondence to: Richard Bluhm, Institute of Macroeconomics, Leibniz Universität Hannover, Königsworther Platz 1, 30167 Hannover, Germany; e-mail: bluhm@mak.uni-hannover.de.

Abstract

This paper analyzes periods of economic stagnation in a panel of countries. We test whether stagnation can be predicted by institutional characteristics and political shocks and compare the impacts of such variables with those of traditional macroeconomic variables. We examine the determinants of stagnation episodes using dynamic linear and nonlinear models. In addition, we analyze whether the effects of the included variables on the onset of stagnation differ from their effects on the continuation of stagnation. We find that inflation, negative regime changes, real exchange rate undervaluation, financial openness, and trade openness have significant effects on both the onset and the continuation of stagnation. Only for trade openness is there robust evidence of a differential impact. Open economies have a significantly lower probability of falling into stagnation, but once in stagnation they do not recover faster.

Type
Articles
Copyright
Copyright © Cambridge University Press 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Acemoglu, Daron, Johnson, Simon, and Robinson, James A. (2001) The colonial origins of comparative development: An empirical investigation. American Economic Review 91, 13691401.CrossRefGoogle Scholar
Acemoglu, Daron, Johnson, Simon, and Robinson, James A. (2002) Reversal of fortune: Geography and institutions in the making of the modern world income distribution. Quarterly Journal of Economics 117, 12311294.CrossRefGoogle Scholar
Acemoglu, Daron, Johnson, Simon, Robinson, James A., and Thaicharoen, Yunyong (2003) Institutional causes, macroeconomic symptoms: Volatility, crises and growth. Journal of Monetary Economics 50, 49123.CrossRefGoogle Scholar
Ai, Chunrong and Norton, Edward C. (2003) Interaction terms in logit and probit models. Economics Letters 80, 123129.CrossRefGoogle Scholar
Akay, Alpaslan (2012) Finite-sample comparison of alternative methods for estimating dynamic panel data models. Journal of Applied Econometrics 27, 11891204.CrossRefGoogle Scholar
Arellano, Manuel and Bond, Stephen (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies 58, 277–297.CrossRefGoogle Scholar
Arellano, Manuel and Bover, Olympia (1995) Another look at the instrumental variable estimation of error-components models. Journal of Econometrics 68, 2951.CrossRefGoogle Scholar
Aron, Janine (2000) Growth and institutions: A review of the evidence. World Bank Research Observer 15, 99135.CrossRefGoogle Scholar
Barro, Robert J. (2000) Inequality and growth in a panel of countries. Journal of Economic Growth 5, 532.CrossRefGoogle Scholar
Berg, Andrew, Ostry, Jonathan D., and Zettelmeyer, Jeromin (2012) What makes growth sustained? Journal of Development Economics 98, 149166.CrossRefGoogle Scholar
Bluhm, Richard and Szirmai, Adam (2012) Institutions and Long-Run Growth Performance: An Analytic Literature Review of the Institutional Determinants of Economic Growth. UNU-MERIT working paper 033, Maastricht Economic and Social Research and Training Centre on Innovation and Technology, United Nations University.Google Scholar
Blundell, Richard and Bond, Stephen (1998) Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87, 115143.CrossRefGoogle Scholar
Bun, Maurice J. G. and Windmeijer, Frank (2010) The weak instrument problem of the system GMM estimator in dynamic panel data models. Econometrics Journal 13, 95126.CrossRefGoogle Scholar
Bussière, Matthieu and Fratzscher, Marcel (2006) Towards a new early warning system of financial crises. Journal of International Money and Finance 25, 953973.CrossRefGoogle Scholar
Cameron, A. Colin, Gelbach, Jonah B., and Miller, Douglas L. (2011) Robust inference with multiway clustering. Journal of Business and Economic Statistics 29, 238249.CrossRefGoogle Scholar
Cerra, Valerie and Saxena, Sweta C. (2008) Growth dynamics: The myth of economic recovery. American Economic Review 98, 439457.CrossRefGoogle Scholar
Chamberlain, Gary (1980) Analysis of covariance with qualitative data. Review of Economic Studies 47, 225238.CrossRefGoogle Scholar
Chamberlain, Gary (1984) Panel data. In Griliches, Z. and Intriligator, M. D. (eds.), Handbook of Econometrics, Vol. 2, pp. 12471318. Amsterdam: Elsevier.Google Scholar
Chinn, Menzie D. and Ito, Hiro (2006) What matters for financial development? Capital controls, institutions, and interactions. Journal of Development Economics 81, 163192.CrossRefGoogle Scholar
Crombrugghe, Denis de and Farla, Kristine (2012) Preliminary Conclusions on Institutions and Economic Performance. UNU-MERIT working paper 035, Maastricht Economic and Social Research and Training Centre on Innovation and Technology, United Nations University.Google Scholar
Deininger, Klaus and Squire, Lyn (1998) New ways of looking at old issues: Inequality and growth. Journal of Development Economics 57, 259287.CrossRefGoogle Scholar
Diebold, Francis X., Rudebusch, Glenn, and Sichel, Daniel (1993) Further evidence on business-cycle duration dependence. In Stock, James H. and Watson, Mark W. (eds.) Studies in Business Cycles, Vol. 28, Business Cycles, Indicators, and Forecasting, Chap. 6, pp. 255285. Chicago: University of Chicago Press.Google Scholar
Engerman, Stanley L. and Sokoloff, Kenneth L. (1997) Factor endowments, institutions, and differential growth paths among New World economies. In Haber, Stephen (ed.), How Latin America Fell Behind, pp. 260296. Stanford, CA: Stanford University Press.Google Scholar
Forbes, Kristin J. (2000) A reassessment of the relationship between inequality and growth. American Economic Review 90, 869887.CrossRefGoogle Scholar
Glaeser, Edward L., Porta, Rafael La, Silanes, Florencio Lopez-de, and Shleifer, Andrei (2004) Do institutions cause growth? Journal of Economic Growth 9, 271303.CrossRefGoogle Scholar
Gleditsch, Nils P., Wallensteen, Peter, Eriksson, Mikael, Sollenberg, Margareta, and Strand, Håvard (2002) Armed conflict 1946–2001: A new dataset. Journal of Peace Research 39, 615637.CrossRefGoogle Scholar
Goemans, Henk E., Gleditsch, Kristian S., and Chiozza, Giacomo (2009) Introducing Archigos: A dataset of political leaders. Journal of Peace Research 46, 269283.CrossRefGoogle Scholar
Greene, William H. (2010) Testing hypotheses about interaction terms in nonlinear models. Economics Letters 107, 291296.CrossRefGoogle Scholar
Greene, William H. (2011) Econometric Analysis, 7th ed. Upper Saddle River, NJ: Prentice Hall.Google Scholar
Greif, Avner (2006) Institutions and the Path to the Modern Economy: Lessons from Medieval Trade. Cambridge, UK: Cambridge University Press.CrossRefGoogle Scholar
Hall, Robert E. and Jones, Charles I. (1999) Why do some countries produce so much more output per worker than others? Quarterly Journal of Economics 114, 83116.CrossRefGoogle Scholar
Hausmann, Ricardo, Pritchett, Lant, and Rodrik, Dani (2005) Growth accelerations. Journal of Economic Growth 10, 303329.CrossRefGoogle Scholar
Hausmann, Ricardo, Rodriguez, Francisco, and Wagner, Rodrigo (2008) Growth collapses. In Reinhart, Carmen M., Vegh, Carlos A., and Velasco, Andres (eds.), Money, Crises and Transition, pp. 376428. Cambridge, MA: MIT Press.Google Scholar
Heckman, James J. (1981) The incidental parameters problem and the problem of initial conditions in estimating a discrete time-discrete data stochastic process. In Manski, Charles F. and McFadden, Daniel L. (eds.), Structural Analysis of Discrete Data With Economic Applications, pp. 179195. Cambridge, MA: MIT Press.Google Scholar
Heston, Alan, Summers, Robert, and Aten, Bettina (2009) Penn World Table, Version 6.3. Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania.Google Scholar
Holtz-Eakin, Douglas, Newey, Whitney, and Rosen, Harvey S. (1988) Estimating vector autoregressions with panel data. Econometrica 56, 13711395.CrossRefGoogle Scholar
Jerzmanowski, Michał (2006) Empirics of hills, plateaus, mountains and plains: A Markov-switching approach to growth. Journal of Development Economics 81, 357385.CrossRefGoogle Scholar
Jones, Benjamin F. and Olken, Benjamin A. (2008) The anatomy of start–stop growth. Review of Economics and Statistics 90, 582587.CrossRefGoogle Scholar
King, Gary and Zeng, Langche (2001) Logistic regression in rare events data. Political Analysis 9, 137163.CrossRefGoogle Scholar
Knack, Stephen and Keefer, Philip (1995) Institutions and economic performance: Cross-country tests using alternative institutional measures. Economics and Politics 7, 207227.CrossRefGoogle Scholar
Kuznets, Simon (1955) Economic growth and income inequality. American Economic Review 45, 128.Google Scholar
Marshall, Monty G. and Jaggers, Keith (2010) Polity IV Dataset. Center for International Development and Conflict Management, College Park, University of Maryland.Google Scholar
Mundlak, Yair (1978) On the pooling of time series and cross section data. Econometrica 46, 6985.CrossRefGoogle Scholar
Neyman, Jerzy and Scott, Elizabeth L. (1948) Consistent estimates based on partially consistent observations. Econometrica 16, 132.CrossRefGoogle Scholar
Nickell, Stephen (1981) Biases in dynamic models with fixed effects. Econometrica 49, 14171426.CrossRefGoogle Scholar
North, Douglas C. and Thomas, Robert P. (1973) The Rise of the Western World, a New Economic History. Cambridge, UK, and New York: Cambridge University Press.CrossRefGoogle Scholar
North, Douglas C., Wallis, John J., and Weingast, Barry R. (2009) Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History. Cambridge, UK, and New York: Cambridge University Press.CrossRefGoogle Scholar
Orme, Chris D. (2001) Two-Step Inference in Dynamic Non-linear Panel Data Models. Mimeo, School of Economic Studies, University of Manchester.Google Scholar
Perotti, Roberto (1996) Growth, income distribution, and democracy: What the data say. Journal of Economic Growth 1, 149187.CrossRefGoogle Scholar
Pritchett, Lant (1998) Patterns of Economic Growth: Hills, Plateaus, Mountains, and Plains. Policy research working paper 1947, World Bank.Google Scholar
Rabe-Hesketh, Sophia and Anders Skrondal (2013) Avoiding biased versions of Wooldridge's simple solution to the initial conditions problem. Economics Letters 120, 346349.CrossRefGoogle Scholar
Reddy, Sanjay and Minoiu, Camelia (2009) Real income stagnation of countries 1960–2001. Journal of Development Studies 45, 123.CrossRefGoogle Scholar
Rodrik, Dani (1999) Where did all the growth go? External shocks, social conflict, and growth collapses. Journal of Economic Growth 4, 385412.CrossRefGoogle Scholar
Rodrik, Dani (2000) Institutions for high-quality growth: What they are and how to acquire them. Studies in Comparative International Development (SCID) 35, 331.CrossRefGoogle Scholar
Rodrik, Dani (2008) The real exchange rate and economic growth. Brookings Papers on Economic Activity 39 (2), 365412.Google Scholar
Rodrik, Dani, Subramanian, Arvind, and Trebbi, Francesco (2004) Institutions rule: The primacy of institutions over geography and integration in economic development. Journal of Economic Growth 9, 131165.CrossRefGoogle Scholar
Roodman, David (2009) A note on the theme of too many instruments. Oxford Bulletin of Economics and Statistics 71, 135158.CrossRefGoogle Scholar
Sachs, Jeffrey D. and Warner, Andrew (1995) Economic reform and the process of global integration. Brookings Papers on Economic Activity 26 (1), 1118.CrossRefGoogle Scholar
Solt, Frederick (2009) Standardizing the world income inequality database. Social Science Quarterly 90, 231242. SWIID Version 3.0, July 2010.CrossRefGoogle Scholar
Wacziarg, Romain and Welch, Karen H. (2008) Trade liberalization and growth: New evidence. World Bank Economic Review 22, 187231.CrossRefGoogle Scholar
Windmeijer, Frank (2005) A finite sample correction for the variance of linear efficient two-step GMM estimators. Journal of Econometrics 126, 2551.CrossRefGoogle Scholar
Wooldridge, Jeffrey M. (2005) Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity. Journal of Applied Econometrics 20, 3954.CrossRefGoogle Scholar
Wooldridge, Jeffrey M. (2010) Econometric Analysis of Cross Section and Panel Data, 2nd ed. Cambridge, MA: MIT Press.Google Scholar
1
Cited by

Send article to Kindle

To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

THE DYNAMICS OF STAGNATION: A PANEL ANALYSIS OF THE ONSET AND CONTINUATION OF STAGNATION
Available formats
×

Send article to Dropbox

To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

THE DYNAMICS OF STAGNATION: A PANEL ANALYSIS OF THE ONSET AND CONTINUATION OF STAGNATION
Available formats
×

Send article to Google Drive

To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

THE DYNAMICS OF STAGNATION: A PANEL ANALYSIS OF THE ONSET AND CONTINUATION OF STAGNATION
Available formats
×
×

Reply to: Submit a response

Please enter your response.

Your details

Please enter a valid email address.

Conflicting interests

Do you have any conflicting interests? *