GOVERNMENT INTERVENTION IN THE ECONOMY AND CRISIS RESILIENCE
Abstract
The author utilizes the results of the latest global crisis to explore the methodology for assessing the correlation between the level of government intervention in the economy and its resilience to crises. The analysis is based on a modified version of the Index of Leftness (Rightness) of Economy, developed by Prof. Nazim Muzaffarli, along with the Cumulative Loss Index.
The examination of this correlation, conducted for 57 countries, revealed that nations with a higher degree of government intervention in the economy prior to the global crisis exhibited a weaker defensive response to the crisis and greater cumulative losses. This indicates that government intervention in capital flows, price formation, and licensing significantly undermines the economic entities’ resilience or "immunity" to crises.
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References
J.A. Shumpeter, Capitalism, Socialism and Democracy, Taylor & Francis e-Library, London, New York, 2003, p. 83.
See: International Monetary Fund “World Economic Outlook: Housing and the Business Cycle,” April 2008.
See: N. Muzaffarli, Sotsialnaia orientiriovannost ekonomiki v pravistskikh i levistskikh sistemakh, Sharg-Garb, Baku, 2014.
See: IL(R)E-2015: Liberal Potential of Economy, ed. by N. Muzaffarli, Institute of Economics, NANA, Baku, 2017,
p. 13 (in Azeri).
See: K.R. Holmes, E.J. Feulner, M.A. O’Grady et al., “2008 Index of Economic Freedom. USA,” Heritage Foundation and The World Street Journal, 2008.
See: K. Schwab, M.P. Porter, “The Global Competitiveness Report 2008-2009,” World Economic Forum, 2008.
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