Institutions and Business Cycles

JEL codes: 
E32
Author/s: 
Version Date: 
Nov 2011
Abstract: 

This paper investigates the relationship between the main features of business cycles and the institutional and structural characteristics of countries of up to 62 industrial, emerging and formerly centrally planned economies from all continents. We derive the business cycle characteristics using the nonparametric Harding-Pagan approach. Our analysis reveals that institutional factors have significant associations with the duration and amplitude of business cycles. Examining the determinants of business cycle synchronization for the countries in our sample, we also demonstrate that the bilateral proximity of institutional and policy environments matters in addition to the gravity arguments and bilateral trade intensity found to be important in earlier studies.

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