Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/203366 
Year of Publication: 
2017
Series/Report no.: 
ADB Economics Working Paper Series No. 526
Publisher: 
Asian Development Bank (ADB), Manila
Abstract: 
The pronounced and persistent impact of the global financial crisis of 2008 motivates our empirical analysis of the role of institutions and macroeconomic fundamentals on countries' adjustment to shocks. Our empirical analysis shows that the associations of growth level, growth volatility, shocks, institutions, and macroeconomic fundamentals have changed in important ways after the crisis. Gross domestic product growth across countries has become more dependent on external factors, including global growth, global oil prices, and global financial volatility. After accounting for the effects global shocks, we find that several factors facilitate adjustment to shocks in middle-income countries. Educational attainment, share of manufacturing output in gross domestic product, and exchange rate stability increase the level of economic growth, while exchange rate flexibility, education attainment, and lack of political polarization reduce the volatility of economic growth. Countries cope with shocks better in the short to medium term by using appropriate policy tools and having good long-term fundamentals.
Subjects: 
growth
institutions
middle income
shocks
volatility
JEL: 
C38
E02
F43
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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