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Institutions and Business Cycles
Author(s) -
Altug Sumru,
Neyapti Bilin,
Emin Mustafa
Publication year - 2012
Publication title -
international finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 39
eISSN - 1468-2362
pISSN - 1367-0271
DOI - 10.1111/j.1468-2362.2013.12000.x
Subject(s) - volatility (finance) , corporate governance , business cycle , economics , variety (cybernetics) , emerging markets , capital market , independence (probability theory) , market economy , monetary economics , macroeconomics , financial economics , finance , statistics , mathematics , artificial intelligence , computer science
Abstract This paper investigates the relationship between the main features of business cycles and the institutional and structural characteristics of 62 industrial, emerging and formerly centrally planned economies from all continents. We find that a variety of institutional indicators, including stronger governance, greater civil liberties, more developed labour and capital markets, and higher levels of central bank independence are significantly associated with business cycle characteristics – namely, volatility and persistence. Our study also demonstrates that similarity of the institutional environment in dimensions such as governance and the level of labour and capital market development strongly affects the co‐movement of business cycles across countries.