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Governance structures and the durability of economic reforms; evidence from inflation stabilizations

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  • Ball, Richard
  • Rausser, Gordon C.

Abstract

This paper investigates the relationship between a country's political-economic and institutional environment, and its ability to implement sustainable economic reform programs. The policy issue on which the study focuses is inflation stabilization. It consists principally of econometric estimations of the relationship between the success of stabilizations in a large sample of countries and several political and economic explanatory variables. The hypotheses tested are drawn both from the recent macroeconomic literature on policy credibility and from political science. The major findings include the following: (1) Despite the "conventional wisdom" to the contrary, political repression does not appear to be an effective means for implementing sustainable stabilization policies. Durable economic reforms and political freedoms appear to be complementary. (2) As has been previously argued theoretically and demonstrated empirically, political instability is detrimental to policy reform. (3) The political will and popular consensus for stabilization policies are enhanced during a severe economic crisis. (4) There is weak evidence that intervention by the IMF, rather than supporting reform programs, can undermine their credibility.

Suggested Citation

  • Ball, Richard & Rausser, Gordon C., 1993. "Governance structures and the durability of economic reforms; evidence from inflation stabilizations," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7qt9r513, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt7qt9r513
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    Cited by:

    1. Campos, Nauro F. & Nugent, Jeffrey B., 1999. "Development Performance and the Institutions of Governance: Evidence from East Asia and Latin America," World Development, Elsevier, vol. 27(3), pages 439-452, March.
    2. Campos, Nauro F., 2000. "Context is everything : measuring institutional change in transition economies," Policy Research Working Paper Series 2269, The World Bank.
    3. Francisco José Veiga, 2002. "IMF arrangements, politics and the timing of stabilizations," NIPE Working Papers 2/2002, NIPE - Universidade do Minho.
    4. Francisco Jose Veiga, 2008. "Why do stabilizations fail?," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 11(2), pages 135-149.
    5. Vítor Castro, 2003. "The Impact of Conflicts of Interest on Inflation Stabilization," NIPE Working Papers 8/2003, NIPE - Universidade do Minho.
    6. Francisco José Veiga, 2003. "The Political Economy of Failed Stabilization," NIPE Working Papers 13/2003, NIPE - Universidade do Minho.

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