The Dynamics of Stagnation

30 Pages Posted: 29 Jan 2015

See all articles by Richard Bluhm

Richard Bluhm

Leibniz University Hannover; UNU-MERIT; Maastricht Graduate School of Governance

Denis de Crombrugghe

Maastricht University

Adam Szirmai

Eindhoven University of Technology (TUE) - Faculty of Technology Management

Date Written: May 8, 2014

Abstract

This paper analyzes periods of economic stagnation in a panel of countries. We test whether stagnation can be predicted by institutional characteristics and political shocks, and compare the impacts of such variables with those of traditional macroeconomic variables. We examine the determinants of stagnation episodes using dynamic linear and non-linear models. In addition, we analyze whether the effects of the included variables on the onset of stagnation differ from the effects on the continuation of stagnation. We find that inflation, negative regime changes, real exchange rate undervaluation, financial openness, and trade openness have significant effects on both the onset and the continuation of stagnation. Only for trade openness there is robust evidence of a differential impact. Open economies have a significantly lower probability of falling into stagnation, but once in stagnation they do not recover faster.

Keywords: growth episodes, stagnation, institutions, dynamic panel data

JEL Classification: O11, O43, C25

Suggested Citation

Bluhm, Richard and Crombrugghe, Denis de and Szirmai, Adam, The Dynamics of Stagnation (May 8, 2014). Macroeconomic Dynamics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2556840 or http://dx.doi.org/10.2139/ssrn.2556840

Richard Bluhm (Contact Author)

Leibniz University Hannover ( email )

Institute of Macroeconomics
Koenigsworther Platz 1
Hannover, 30167
Germany

HOME PAGE: http://mak.uni-hannover.de

UNU-MERIT ( email )

Keizer Karelplein 19
Maastricht, 6211TC
Netherlands

Maastricht Graduate School of Governance ( email )

Keizer Karelplein 19
PO Box 616
Maastricht, 6200MD
Netherlands

Denis de Crombrugghe

Maastricht University ( email )

Keizer Karelplein 19
PO Box 616
Maastricht, 6200MD
Netherlands

HOME PAGE: http://www.governance.unimaas.nl

Adam Szirmai

Eindhoven University of Technology (TUE) - Faculty of Technology Management ( email )

P.O. Box 513
5600 MB Eindhoven
Netherlands

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