Essays on economic growth: institutions and policies

This dissertation is on general principles of growth, comprising of three chapters and a short introduction. Chapter 1 analyses the macroeconomic adjustment experienced in IMF/EU-programme countries during the Eurozone crisis by creating counterfactuals based on comparable historical or contemporaneous episodes worldwide. It therefore shows how crisis management and the institutional framework in which it operates have important implications for the depth of the recession. In particular, an incomplete Eurozone institutional setup contributed to aggravate the crisis through higher uncertainty. The first general principle that can be drawn is that sustained growth rests not only in preventing booms but also in designing institutions that well-manage busts. When growth slows down, calls for deep structural reforms multiply. However, estimations of the short- and medium-term impact of these reforms on GDP growth remain methodologically problematic and still highly controversial. As such, Chapter 2 estimates the impact of 23 wide-reaching structural reform packages (including both real and financial sector measures) rolled out in 22 countries between 1961 and 2000. It therefore illustrates how large reform packages tend to have on average a positive medium-term impact on growth, but these effects were highly heterogeneous across countries. The second general principle that can be drawn is that deep economic reforms are no growth silver bullet per se, and rather require careful design, tailored to local conditions. Finally, Chapter 3 explores factors behind the largest growth acceleration episodes that took place worldwide between 1962 and 2002 and identifies general principles that should underlie a successful growth strategy. In particular, it shows how accelerationstend to be preceded by a deep recession and major economic policy changes. Once this information is combined with a set of counterfactual analyses, it finds that acceleration strategies should not contain off-the-shelf approaches or necessarily all-encompassing ‘shock therapy’solutions. Despite standard growth determinants doing a fairly good job at characterising successful accelerations, the quest for take-offs remains elusive, as they seemextremely hard to engineer with a high degree of certainty