Modelling state dependence in cross-country panel data

The overarching theme of this book is the cross-country data-based econometric analysis of the dependence of the effects of macroeconomic policies on the prevailing institutional environment. In chapter one, indices of governance quality and domestic financial market development for 84 countries and the time period from 1970 to 2009 are constructed in order to characterize different institutional environments across these countries and time periods. Both indices are constructed in a dynamic state-space model, and are based on a broad range of variables capturing specific aspects of governance quality and domestic financial market development, respectively. In chapter two, the effects of macroeconomic policies on output and a broader measure of human well-being -- the value of a country's Human Development Index -- are investigated in the conditional pooled mean-group panel data model. Particular consideration is given to the possibility that the effects of the macroeconomic policies vary across environments characterized by different degrees of governance quality and gender inequality. In chapter three, exploiting again the conditional pooled mean-group panel data model, the role of governance quality and domestic financial market development for the growth effects of financial globalization -- that is, the increasing integration of national into the global capital markets -- is examined. Finally, in chapter four, a novel panel vectorautoregressive model is set up in order to explore to what extent cross-country asymmetries in the monetary transmission mechanism are accounted for by cross-country differences in financial structure, labor market rigidities and industry mix.