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Article: Governance and financial fragility.
- Article from:
- Economic Papers - Economic Society of Australia
- Article date:
- December 1, 2004
- Author:
CopyrightCOPYRIGHT 2004 Economic Society of Australia. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Using data from a cross-sectional sample of 81 countries, this paper provides empirical evidence to support the hypothesis that the quality of governance is an important determinant of financial fragility (as measured by the volatility of investment over time). Not only do the results suggest that better governance reduces investment volatility, but interestingly the results also suggest that governance variables are better able to explain volatility in investment than some standard macroeconomic measure such as inflation.
Keywords: Business fluctuations, Governance
JEL Code: G0
1 Introduction
Over the past twenty-five years, financial ...