Discussion paper

DP5642 Macroeconomic Policy and the Distribution of Growth Rates

We examine the view that high-quality macroeconomic policy is a necessary, but not sufficient, condition for economic growth. We first construct a new index of the quality of macroeconomic policy. We then directly compare growth rate distributions across countries with good and bad policies; use Bayesian methods to examine the partial correlation between policy and growth; and outline how growth and steady-state income levels might have differed, had all countries achieved good policy outcomes. One finding is that bad macroeconomic policies can be offset by other factors, but the fastest-growing countries in our sample all shared high-quality macroeconomic management.

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Citation

Temple, J and V Sirimaneetham (eds) (2006), “DP5642 Macroeconomic Policy and the Distribution of Growth Rates”, CEPR Press Discussion Paper No. 5642. https://cepr.org/publications/dp5642