Country Stress Events: Does Governance Matter?

44 Pages Posted: 10 May 2012

See all articles by Carlos Caceres

Carlos Caceres

International Monetary Fund (IMF)

Anna Kochanova

Max Planck Institute for Research on Collective Goods; Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2012

Abstract

This paper analyzes the linkages between governance quality and country stress events. It focuses on two types of events: fiscal and political stress events, for which two innovative stress indicators are introduced. The results suggest that weaker governance quality is associated with a higher incidence of both fiscal and political stress events. In particular, internal accountability, which measures the responsiveness of governments to improving the quality of the bureaucracy, public service provision, and respect for the institutional framework in place, is positively associated with fiscal stress events. However, external accountability, which captures government accountability before the public in general, through elections and the democratic process, seems to be more important for political stress events. These results hold when using balanced country samples where region, oil-exporter status, income level, and time are taken into account.

Keywords: Governance, business environment, fiscal crises, political crises

JEL Classification: A12, E02, E62, G38, K00

Suggested Citation

Caceres, Carlos and Kochanova, Anna, Country Stress Events: Does Governance Matter? (May 1, 2012). Available at SSRN: https://ssrn.com/abstract=2055771 or http://dx.doi.org/10.2139/ssrn.2055771

Carlos Caceres (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Anna Kochanova

Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

P.O. Box 882
7 Politickych veznu
Prague 1, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

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