Institutions and business cycles

Date
2012
Authors
Altug, S.
Neyapti, B.
Emin, M.
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Source Title
International Finance
Print ISSN
1367-0271
Electronic ISSN
1468-2362
Publisher
Wiley-Blackwell Publishing Ltd.
Volume
15
Issue
3
Pages
347 - 366
Language
English
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Abstract

This paper investigates the relationship between the main features of business cycles and the institutional and structural characteristics of 62 industrial, emerging and formerly centrally planned economies from all continents. We find that a variety of institutional indicators, including stronger governance, greater civil liberties, more developed labour and capital markets, and higher levels of central bank independence are significantly associated with business cycle characteristics - namely, volatility and persistence. Our study also demonstrates that similarity of the institutional environment in dimensions such as governance and the level of labour and capital market development strongly affects the co-movement of business cycles across countries. © 2013 Blackwell Publishing Ltd.

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