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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 ,
Denis de Crombrugghe  and
Adam Szirmai
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: [email protected].
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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.

Keywords

Growth CollapsesStagnationInstitutionsDynamic Panel Data
Type
Articles
Information
Macroeconomic Dynamics , Volume 20 , Special Issue 8: Technology Aspects in the Process of Development , December 2016 , pp. 2010 - 2045
Copyright
Copyright © Cambridge University Press 2016 

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