Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/51474
Authors: 
Chong, Alberto
Gradstein, Mark
Year of Publication: 
2006
Series/Report no.: 
Working paper // Inter-American Development Bank, Research Department 578
Abstract: 
A growing body of recent macroeconomic evidence suggests that volatility is detrimental to economic growth. The channels through which volatility affects growth, however, are less clear; substantive evidence based on disaggregate data is almost non-existent. This paper offers a framework in which policy volatility has an adverse effect on firms' entry into productive industries, thereby affecting economic growth. Empirical support for this relationship is based on a detailed dataset of thousands of firms from some 80 countries. Additional evidence is provided on the channels through which volatility affects firm growth, showing that institutional obstacles magnify the effect.
Subjects: 
Firm Growth
Policy Volatility
Institutions
Finance
JEL: 
E60
H11
O11
Document Type: 
Working Paper

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