Institutions and economics

Olympia Bover, Jose Maria Casado, Sónia Costa, Philip Du Caju, Yvonne McCarthy, Eva Sierminska, Panagiota Tzamourani, Ernesto Villanueva, Tibor Zavadil, 08 November 2016

Household micro-data reveal striking differences in secured debt holdings across Eurozone countries. This column presents new evidence on the role of household characteristics and country institutions in accounting for the cross-country patterns observed. In countries with lengthier asset repossession periods, young or low-income households face higher borrowing costs, leading to a lower probability of holding mortgages.

Pınar Yeşin, 26 October 2016

The IMF invests significant resources in developing models to estimate equilibrium exchange rates. This column assesses the predictive power of one vintage of IMF exchange rate models during 2006–2011. The models performed exceptionally well at predicting exchange rate movements over the medium run, which is particularly remarkable given that the period covered the unanticipated Global Crisis and the assessments were not shared publicly at the time.

Daron Acemoglu, Leopoldo Fergusson, James Robinson, Dario Romero, Juan F. Vargas, 06 October 2016

A major problem in many poor countries is lack of state capacity to control violence, enforce laws, tax and regulate economic activity, or provide public services. This column uses the example of Colombia to assess the effectiveness of top-down state-building strategies that prioritise military objectives ahead of all others. Such approaches may not only fail to develop other crucial aspects of state capacity, but may also lead to deteriorations in these incipient capacities.

Julia Ruiz Pozuelo, Amy Slipowitz, Guillermo Vuletin, 30 September 2016

The debate over whether democracy causes economic prosperity and growth dates back millennia. Recent empirical results suggest that democratisation has a sizable positive effect on economic growth, but endogeneity and reverse causality may be driving these results. This column uses new data from surveys of democracy experts to solve the endogeneity puzzle. The positive association between democracy and economic growth is a reflection of economic turmoil causing the emergence of democratic rule, rather than democracy causing more economic growth.

Melissa Dell, Pablo Querubin, 16 August 2016

The nature of US military interventions has become relevant in the face of new growing threats, particularly from so-called Islamic State. While top-down strategies that rely on overwhelming firepower are sometimes favoured by politicians, longer-term strategies use a bottom-up approach, gaining citizens’ support through civic engagement. This column introduces evidence from US actions during the Vietnam War to show that bottom-up approaches are more successful in countering insurgencies than violent, top-down interventions.

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