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Economic Uncertainty and Structural Reforms

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  • Alessandra Bonfiglioli
  • Gino Gancia
Abstract
Does economic uncertainty promote the implementation of structural reforms? We answer this question using one of the most exhaustive cross-country panel data set on reforms in six major areas and measuring economic uncertainty with stock market volatility. To address endogeneity concerns, we propose various identification strategies, instrumenting uncertainty with world shocks to volatility and with natural disasters, terrorist attacks, political coups and revolutions. Across all specifications, we find that uncertainty has a positive and significant effect on the adoption of reforms. This result is robust to the inclusion of a large number of controls, such as political variables, economic variables, crisis indicators, and a host of country, reform and time fixed effects.

Suggested Citation

  • Alessandra Bonfiglioli & Gino Gancia, 2015. "Economic Uncertainty and Structural Reforms," Working Papers 847, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:847
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    Cited by:

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    2. Fornero, Elsa & Lo Prete, Anna, 2019. "Voting in the aftermath of a pension reform: the role of financial literacy," Journal of Pension Economics and Finance, Cambridge University Press, vol. 18(1), pages 1-30, January.
    3. Masuch, Klaus & Anderton, Robert & Setzer, Ralph & Benalal, Nicholai, 2018. "Structural policies in the euro area," Occasional Paper Series 210, European Central Bank.
    4. Vera Eichenauer & Ronald Indergand & Isabel Z. Martínez & Christoph Sax, 2020. "Constructing Daily Economic Sentiment Indices Based on Google Trends," KOF Working papers 20-484, KOF Swiss Economic Institute, ETH Zurich.
    5. Cacciatore, Matteo & Duval, Romain & Fiori, Giuseppe & Ghironi, Fabio, 2016. "Market reforms in the time of imbalance," Journal of Economic Dynamics and Control, Elsevier, vol. 72(C), pages 69-93.
    6. Shuanping Dai & Guanzhong Yang, 2020. "Does Social Inducement Lead to Higher Open Innovation Investment? An Experimental Study," Sustainability, MDPI, vol. 12(5), pages 1-17, March.
    7. Mirela Miescu, 2019. "Uncertainty shocks in emerging economies," Working Papers 277077821, Lancaster University Management School, Economics Department.
    8. Romp, Ward & Beetsma, Roel, 2023. "OECD pension reform: The role of demographic trends and the business cycle," European Journal of Political Economy, Elsevier, vol. 77(C).
    9. Alessandra Bonfiglioli & Rosario Crinò & Gino Gancia, 2022. "Economic uncertainty and structural reforms: Evidence from stock market volatility," Quantitative Economics, Econometric Society, vol. 13(2), pages 467-504, May.
    10. Beetsma, Roel & Romp, Ward & van Maurik, Ron, 2017. "What Drives Pension Reform Measures in the OECD? Evidence based on a New Comprehensive Dataset and Theory," CEPR Discussion Papers 12313, C.E.P.R. Discussion Papers.
    11. Michael Ryan, 2020. "An Anchor in Stormy Seas: Does Reforming Economic Institutions Reduce Uncertainty? Evidence from New Zealand," Working Papers in Economics 20/11, University of Waikato.

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    More about this item

    Keywords

    reforms; uncertainty;

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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