What explains different duration of the Great Recession across countries?
| Author: | Mgr. Vojtěch Petrů |
|---|---|
| Year: | 2020 - summer |
| Leaders: | PhDr. Jaromír Baxa Ph.D. |
| Consultants: | |
| Work type: | Economic Theory Masters |
| Language: | English |
| Pages: | 50 |
| Awards and prizes: | |
| Link: | https://is.cuni.cz/webapps/zzp/detail/200456/ |
| Abstract: | The research concerning differences in duration of the Great Recession is limited and inconclusive. We define duration of crisis as the count of years lost due to the crisis, and estimate the determinants of crisis duration on the dataset of 54 developed and developing countries. This thesis contrasts with previous literature by employing Bayesian Model Averaging (BMA) to accommodate for the large amount of potential explanatory variables and to address model uncertainty. Moreover, an innovative measure of export competitiveness, which accounts for the changes in non-price factors such as quality, is used. The results bring suggestive evidence of positive impact of developed financial markets, high share of private consumption and improvements in export competitiveness. We also find positive effect of fiscal policy stimulus once it is controlled for the feedback loop of uncertainty which appears when heavily indebted countries finance fiscal stimulus through issuance of additional debt. Lastly, it needs to be concluded, that the results are not robust to all prior specifications. In particular, the more restrictive Beta binomial model prior shrinks the statistical significance of aforementioned results heavily. |
