THE EFFECT OF MACROECONOMIC VARIABLES ON ECONOMIC-GROWTH RATES - A CROSS-COUNTRY STUDY

The paper studies the impact of macroeconomic variables on economic growth during the period 1960-87. We find no evidence for the view that countries which pursue macroeconomic policies that result in high inflation, large budget deficits, and high levels of government consumption spending suffer low rates of growth of per capita output. We find weak evidence, however, for a negative effect of high marginal tax rates on growth. Further, we find strong evidence that countries which achieve low variability of output growth and which expand their foreign trade have high rates of economic growth.