Economic resilience and the state: A global panel analysis

Abstract

Modern economies are disturbed by recessions that became more and more globalized, much contagious between countries and regions and with higher negative impact during recessions. In this dynamic context, the recovery after recession is essential to prepare the economy for the next business cycle. Understanding of these business cycles (their causes and impact) is fundamental for public policies that should avoid to be pro-cyclical and to add more vulnerabilities to the existing ones. The economic resilience is now a key concept and refers to the capacity of the economy to recover after any recession. The aim of this paper was to explore the relationship between the dimension of the state and the resilience of the economic system by using a global panel data. The study includes 87 countries (870 observations) and data covering 2009 – 2019 provided by World Bank. We used 2 depending variables: GDP gap and GDP per capita gap and 12 explanatory variables grouped in 4 categories: dimension of the state, the quality of public governance, economic development and regional/global economic dependence). The results are robust and significant, confirming that the dimension of the public intervention and the quality of the public governance & administration have a clear impact on the economic resilience and recovery between business cycles.