What explains different duration of the Great Recession across countries?
|Author:||Mgr. Vojtěch Petrů|
|Year:||2020 - summer|
|Leaders:|| PhDr. Jaromír Baxa Ph.D.
|Work type:|| Economic Theory
|Awards and prizes:|
|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.