Friday, 21 February, 2014 | 11:00 | Defense - PhD

Petar Stankov: “Empirical Essays on Crises, Reforms and Growth”

Dissertation Committee:
Lubomír Lízal (chair)
Evangelia Vourvachaki
Peter Katuščák
Levent Çelik
Jan Kmenta
Jan Švejnar



This work addresses three policy-relevant empirical issues. First, how do banking crises affect financial reforms? It turns out that banking crises produce a variety of reform patterns in the financial sector over time. Second, do countries which reform their financial, product, and labor markets grow similarly? The results suggest that some countries benefit more from market-oriented reforms than others. Third, if some countries benefit more, could it be because various economies have markedly different firm-size distributions, and firms of different size grow differently after identical reforms? If firms of different size indeed grow differently after identical reforms, this could produce diverse growth outcomes across countries after similar reforms.

The first study has been motivated by the fact that a number of countries have gone through banking crises since the early 1970s. It links those episodes with the patterns of various financial reforms within those countries. As banking crises are endogenous, crisis exposures to major trading partners help identify the causality between crises and reforms. Consistent with the previous literature, the results of this work demonstrate that systemic banking crises reverse most financial reforms. However, they do so with various lags, whereas the impact of non-systemic crises is largely insignificant. The main results remain unaffected after numerous robustness checks. The main contribution of this work is to study financial reforms in a dynamic empirical framework with endogenously determined banking crises. A rich set of policy implications is discussed which could help establish a growth-enhancing financial regulatory framework after banking crises.

The second study analyzes the influence of credit-, labor-, and product market deregulation policies on economic growth in more than 60 economies over a period of 40 years since 1970. By combining a difference-in-difference strategy with an IV approach to the endogeneity of the reform timing, this work finds that deregulation contributed to the per capita GDP levels of the early and consistent reformers relatively more than to the ones of the late reformers. The paper also finds a significant growth acceleration effect from market-oriented reforms over shorter periods of time. However, the growth acceleration effects dissipate over longer periods. A number of robustness checks support these conclusions.

The third study uses large firm-level data to search for the reasons similar market-oriented reforms can produce different growth outcomes across countries. It combines two observations. On the one hand, economies have markedly different firm size distributions. On the other hand, firms of different size grow differently after identical financial- and product-market liberalization reforms. Thus, identical reforms can produce different growth outcomes across countries. This result is reached by exploring firm-level data on sales and sales per worker across 135 developing and post-transition economies between 2000-2010. It helps explain the remarkable variation in the vast development literature studying the effects of various market-oriented reforms across countries and over time.

Full Text: “Empirical Essays on Crises, Reforms and Growth” by Petar Stankov