Chapter 12 Medium-Term Growth: The Role of Policies and Institutions

Michal Jerzmanowski; David Cuberes

doi:10.1108/S1574-8715(2011)0000011017

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Frontiers of Economics and Globalization

ISSN: 1574-8715
Series editor(s): Professor Hamid Beladi, Professor E. Kwan Choi

Subject Area: Economics

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Chapter 12 Medium-Term Growth: The Role of Policies and Institutions

Document Information:
Title:	Chapter 12 Medium-Term Growth: The Role of Policies and Institutions
Author(s):	Michal Jerzmanowski, David Cuberes
Volume:	11 Editor(s): Olivier de La Grandville ISBN: 978-1-78052-396-5 eISBN: 978-1-78052-397-2
Citation:	Michal Jerzmanowski, David Cuberes (2011), Chapter 12 Medium-Term Growth: The Role of Policies and Institutions, in Olivier de La Grandville (ed.) Economic Growth and Development (Frontiers of Economics and Globalization, Volume 11), Emerald Group Publishing Limited, pp.319-366
DOI:	10.1108/S1574-8715(2011)0000011017 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
Article type:	Chapter Item
Abstract:	In this chapter we review the recent and growing literature on medium-term growth patterns. This strand of research emerged from the realization that for most countries economic development is a highly unstable process; over a course of a few decades, a typical country enjoys periods of rapid growth as well episodes of stagnation and economic decline. This approach highlights the complex nature of growth and implies that studying transitions between periods of fast growth, stagnation, and collapse is essential for understanding the process of long run growth. We document recent efforts to characterize and study such growth transitions. We also update and extend some of our earlier research. Specifically, we use historical data from Maddison to confirm a link between political institutions and propensity to experience large swings in growth. We also study the role of institutions and macroeconomic policies, such as inflation, openness to trade, size of government, and real exchange rate overvaluation, in the context of growth transitions. We find surprisingly complex effects of some policies. For example, trade makes fast growth more likely but also increases the frequency of crises. The size of government reduces the likelihood of fast miracle-like growth while at the same time limiting the risk of stagnation. Moreover, these effects are nonlinear and dependent on the quality of institutions. We conclude by highlighting potentially promising areas for future research.