Do Weak Institutions Prolong Crises? On the Identification, Characteristics, and Duration of Declines during Economic Slumps

Arbeitspapier

This paper defines economic slumps as sequences of structural breaks exhibiting a specific pattern. We identify 58 such episodes between 1950 and 2008 among 138 countries, and then examine the phases of decline and their duration. In some countries declines last extremely long, and we put several likely contributing factors to the test. We find evidence that weak institutions precede crises and, interestingly, positive reforms occur thereafter. Strong institutions shorten the duration of crises, ethnic cleavages do the reverse. However, the negative effects of ethnic cleavages are not insurmountable: an interaction effect suggests they can be offset by appropriate institutions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4594

Classification and Topics

• Classification: Wirtschaft ; Institutions and Growth ; Macroeconomic Analyses of Economic Development ; Duration Analysis; Optimal Timing Strategies ; Economic Growth of Open Economies
• Subject: economic slumps ; crises ; institutions ; structural breaks ; duration analysis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bluhm, Richard ; de Crombrugghe, Denis ; Szirmai, Adam
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/93438
• Last update: 10.03.2025, 11:43 AM CET