Aggregate demand shortfalls and economic freedom

Murphy, Ryan; Smith, Taylor Leland

doi:10.1007/s11138-017-0377-0

Cited by 12 publications

(21 citation statements)

References 15 publications

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“…to account for this effect we add to the model the variable Trade computed as exports plus imports as a percentage of GDP and obtained from the WDI. 8 -Crises are another factor that has been identified as having a negative effect on economic freedom (de Haan et al, 2009;Stocker, 2016;Murphy and Smith, 2017); a dummy that takes the value of one when a financial crises occur is used to account for this effect; financial crises are identified following the works by Laeven and Valencia (2018) and Nguyen et al (2020).…”

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confidence: 99%

Government ideology and economic freedom

Castro

Martins

2021

Journal of Comparative Economics

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This paper tests the widespread belief that right-wing governments tend to promote economic freedom while left-wing ones prefer more control over the economy. Using annual data for 106 countries over the period 1975-2015 and a two-step system GMM estimator, this study shows that right-wing governments are indeed more prone to promote economic freedom and to deregulate the economy. It also finds that this effect seems to be stronger in developing/emerging economies than in more developed countries. Moreover, the analysis of the broad dimensions of economic freedom indicates that right-wing governments tend to act by improving monetary soundness and freedom to trade internationally and by easing regulations that restrict entry into markets. Mainstream left-wing governments do not seem to affect economic freedom, however populist left-wing parties, when in office, are found to have a detrimental effect.

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confidence: 99%

Government ideology and economic freedom

Castro

Martins

2021

Journal of Comparative Economics

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“…The empirical results reported by de Haan, Sturm, and Zandberg () suggest that banking crises may reduce economic freedom in the short run, but induce liberalization over a longer‐run time frame. Murphy and Smith () found that negative demand‐side macroeconomic shocks are followed by reductions in economic freedom. Similarly, Stocker () found that the level of economic freedom is lower as a result of several types of crises, with the possible exception of external debt crises.…”

Section: The Determinants Of Economic Freedommentioning

confidence: 99%

The Determinants of Economic Freedom: A Survey

Lawson

Murphy

Powell

2020

Contemporary Economic Policy

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A large literature has found positive associations between economic freedom and income, growth, and a variety of other desirable outcomes. This paper surveys the literature that seeks to explain the causes of economic freedom. Some of the most consistent findings in this literature are that current levels of economic freedom are strongly correlated with past levels; freer countries have more difficulty continuing to improve their economic freedom; democracy and political freedom are positively associated with economic freedom; and inequality is negatively related. (JEL E02, E14, O17, O43, P1)

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“…7 An analogous question is whether an economically free country would see its economic freedom decline, or whether an economically unfree country would see its economic freedom decrease. However, the regressions found in Murphy and Smith (2018) could be thought of, for instance, as implying that a free country would have become even freer in the absence of an aggregate demand shortfall, ceteris paribus. 8 See Ruhm (2019) for the claim that the focus on identification crowds out empirical research that ought to be considered interesting and important.…”

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confidence: 99%

Does democracy die in recessions? A descriptive analysis of aggregate demand shortfalls and regime transition

Murphy

2020

Economic Affairs

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Can a central bank accidentally provoke changes to a country's political regime? Sumner (2015) proposes that macroeconomic mismanagement on the part of central bank authorities, leading to declines in nominal output, can cause voters to respond with populism at the ballot box. Murphy and Smith (2018) have found evidence for this hypothesis, with populism interpreted as movements away from liberal market institutions. This article extends the hypothesis to macroeconomic mismanagement and its relationship with democratic political institutions. It finds both that recessions foreshadow a lower probability of a dictatorship becoming a democracy, and that a democracy is more likely to become a dictatorship. The relationship with autocratisation is most visible after 15 years, while the negative relationship with democratisation is far more persistent over time. These findings, it must be stressed, are historical and descriptive, not necessarily causal. K E Y W O R D S autocracy, behavioural political economy, democracy, democratisation, market monetarism J E L C L A S S I F I C A T I O N D72; P16; E30

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Aggregate demand shortfalls and economic freedom

Cited by 12 publications

References 15 publications

Government ideology and economic freedom

Government ideology and economic freedom

The Determinants of Economic Freedom: A Survey

Does democracy die in recessions? A descriptive analysis of aggregate demand shortfalls and regime transition

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