Review of Economics and Institutions 

About: Review of Economics and Institutions is an academic journal. The journal publishes majorly in the area(s): Productivity & Debt. It has an ISSN identifier of 2038-1379. It is also open access. Over the lifetime, 92 publications have been published receiving 2571 citations.

The role of institutions in growth and development

Abstract: In this paper authors argue that the main determinants of differences in prosperity across countries are differences in economic institutions. To solve the problem of development will entail reforming these institutions. Unfortunately, this is difficult because economic institutions are collective choices that are the outcome of a political process. The economic institutions of a society depend on the nature of political institutions and the distribution of political power in society. As yet, authors only have a highly preliminary understanding of the factors that lead a society into a political equilibrium which supports good economic institutions. However, it is clear that it is the political nature of an institutional equilibrium that makes it very difficult to reform economic institutions. The authors illustrate this with a series of pitfalls of institutional reforms. The author's analysis reveals challenges for those who would wish to solve the problem of development and poverty. That such challenges exist is hardly surprising and believe that the main reason for such challenges is the forces authors have outlined in this paper. Better development policy will only come when authors recognize this and understand these forces better. Nevertheless, some countries do undergo political transitions, reform their institutions, and move onto more successful paths of economic development.

External Debt and Growth

Abstract: This paper assesses the non linear impact of external debt on growth using panel data for 93 developing countries. The estimates support a non-linear, hump- shaped relationship between debt and growth, especially when the debt burden is measured relative to GDP. For a country with average indebtedness, doubling the debt ratio reduces growth by a third to a half percentage point after controlling for endogeneity. Our findings also suggest that the average impact of debt becomes negative at about 160-170 percent of exports or 35-40 percent of GDP and the marginal impact of debt at about half of these values.

Sudden stops in the Euro area

Abstract: The single currency was expected to make national balance of payments irrelevant for euro-area members. From 2010 onwards, however, governments, but also banks and non-financial companies in several euro-area countries have had difficulty getting access to non-resident financing. Assessing whether there has been a balance-of-payment crisis by looking at the current-account developments is a flawed approach in the case of countries that receive significant official support through assistance programmes or the Eurosystem of central banks. In this paper we document the evolution of private capital flows and formally test for the existence of ‘sudden stops’. We find that Greece, Ireland, Italy, Portugal and Spain experienced significant private-capital inflows from 2002 to 2007-09, followed by unambiguously massive outflows that qualify as ‘sudden stops’. The timeline suggests contagion effects were present. We document the substitution of the private capital flows by public flows. In particular, we show that (weak) banks in distressed countries took up a major share of central bank refinancing, thereby contributing to the build-up of intra-Eurosystem net balances. The evidence that the euro area has been subject to internal balance-of-payment crises should be taken as a strong signal of weakness and as an invitation to systemic reform.

Mobile Phones, Financial Inclusion, and Growth

Abstract: This paper assesses the impact of mobile phone rollout on economic growth in a sample of African countries from 1988 to 2007. Further, in light of the large financial infrastructure gap in African countries, we investigate whether mobile phone development fosters economic growth through better financial inclusion. In estimating the impact of mobile phone development on growth, we use mobile penetration rate as well as the cost of mobile local calls to capture mobile phone diffusion, while financial inclusion is measured by the number of deposits or loans per head. Using the System Generalized Method of Moments (GMM) estimator to address endogeneity issues, the results confirm that mobile phone development contributes significantly to economic growth in African countries. Part of the positive effect of mobile phone penetration on growth comes from greater financial inclusion.

The Relationship Between Health and Growth: When Lucas Meets Nelson-Phelps

Abstract: This paper revisits the relationship between health and growth in light of modern endogenous growth theory. We propose a unified framework that encompasses the growth effects of both the rate of improvement of health and the level of health. Based on cross-country regressions over the period 1960-2000, where we instrument for both variables, we find that a higher initial level and a higher rate of improvement in life expectancy both have a significantly positive impact on per capita GDP growth. Then, restricting attention to OECD countries, we find supportive evidence that only the reduction in mortality below age forty generates productivity gains, which in turn may explain why the positive correlation between health and growth in cross-OECD country regressions appears to have weakened since 1960.