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Dictatorship, Democracy and Institutions: Macropolicy in China and India

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  • Ashima Goyal

Abstract

We explore the hypothesis that macroeconomic polices are influenced by political structure, through a systematic comparison of reform period macroeconomic policy choices and outcomes, in China and India. One decade lagged Indian reform in the context of similar economic and very different political structures offers a powerful natural experiment. Chinese low but positive real interest rates, facilitated by greater exchange rate volatility, and high infrastructure investment allowed it to outperform India in its first post reform decade. We find political structure did lead to specific inefficiencies in macroeconomic outcomes but macro-institutional changes exist that can improve policy. More openness under similar labor endowments give both countries the opportunity to commit to more effective, stable yet stimulatory, macroeconomic institutions and policies.

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  • Ashima Goyal, 2005. "Dictatorship, Democracy and Institutions: Macropolicy in China and India," Working Papers id:264, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:264
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    Cited by:

    1. Ashima Goyal, 2005. "“Incentives from Exchange Rate Regimes in an Institutional Context"," Macroeconomics Working Papers 22370, East Asian Bureau of Economic Research.
    2. Ashima Goyal, 2005. "Incentives from exchange rate regimes in an institutional context," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2005-002, Indira Gandhi Institute of Development Research, Mumbai, India.

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