Country Stress Events: Does Governance Matter?

May 1, 2012

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Format: Chicago

Anna Kochanova, and Carlos Caceres. Country Stress Events: Does Governance Matter?, (USA: International Monetary Fund, 2012) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyzes the linkages between governance quality and country stress events. It focuses on two types of events: fiscal and political stress events, for which two innovative stress indicators are introduced. The results suggest that weaker governance quality is associated with a higher incidence of both fiscal and political stress events. In particular, internal accountability, which measures the responsiveness of governments to improving the quality of the bureaucracy, public service provision, and respect for the institutional framework in place, is positively associated with fiscal stress events. However, external accountability, which captures government accountability before the public in general, through elections and the democratic process, seems to be more important for political stress events. These results hold when using balanced country samples where region, oil-exporter status, income level, and time are taken into account.

Subject: Corruption, Debt default, Financial soundness indicators, Fiscal risks, Personal income

Keywords: Governance effectiveness, Governance indicator, Governance measure, Governance quality, Stress event, WP

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/116
Stock No:

WPIEA2012116
ISBN:

9781475503456
ISSN:

1018-5941

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