The Dynamics of Stagnation: A Panel Analysis of the Onset and Continuation of Stagnation

R. Bluhm, D. de Crombrugghe, A. Szirmai

Research output: Contribution to journalArticleAcademicpeer-review

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.

Original languageEnglish
Pages (from-to)2010-2045
Number of pages36
JournalMacroeconomic Dynamics
Volume20
Issue number8
DOIs
Publication statusPublished - 1 Dec 2016

JEL classifications

  • o47 - "Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence"
  • o00 - Economic Development, Technological Change, and Growth

Keywords

  • Dynamic Panel Data
  • Growth Collapses
  • Institutions
  • Stagnation
  • SYSTEM
  • INITIAL CONDITIONS PROBLEM
  • INSTITUTIONS
  • COUNTRIES
  • GROWTH
  • DATA MODELS
  • CRISES
  • INCOME INEQUALITY

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