This paper investigates the impact of institutions or structural policies on the volatilityof income or GDP per capita in transition countries and in Kazakhstan in particular. Inthe first part of the paper we compare Kazakhstans institutional framework with othertransition economies based on a broad range of indicators. Using factor analytical toolsto reduce the dimensionality of the indicator space we find that in general Kazakhstansinstitutional quality ranks among the lowest of the 24 transition countries investigated.Reform progress was mainly achieved in infrastructure. In the second part of the paperwe employ state-of-the-art Bayesian Model Averaging (BMA) to identify institutionaland macroeconomic policy areas that have the strongest impact on output volatility intransition economies. The analysis shows that good legal and administrative institutionscan help smooth output volatility. Moreover, we also find that inflation and currentaccount volatility and to a smaller extend exchange rate fluctuations are importantdeterminants of output volatility.
Institutions output volatility development transitions economies model uncertainty Bayesian Model Averaging