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Does democracy lower growth volatility? A dynamic panel analysis

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  • Yang, Benhua
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    Abstract

    This paper employs dynamic panel generalized method of moment (GMM) technique to empirically examine the causal relationship between democracy and growth volatility for a sample of 138 countries over the 1968-2002 period. Improving upon the methodology of earlier papers, this study finds that the causal effects of democracy on volatility are not highly robust as previously suggested. Instead, the results of this paper indicate that the democracy-volatility relationship may depend on the ethnic structure of a society. In countries with high degrees of ethnic heterogeneity, democracy appears to significantly reduce growth volatility; in countries with low degrees of ethnic diversity such a relationship is not significant.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Macroeconomics.

    Volume (Year): 30 (2008)
    Issue (Month): 1 (March)
    Pages: 562-574

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    Handle: RePEc:eee:jmacro:v:30:y:2008:i:1:p:562-574

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    Web page: http://www.elsevier.com/locate/inca/622617

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    Cited by:
    1. repec:hal:journl:halshs-00384483 is not listed on IDEAS
    2. Yannick Lucotte, 2010. "The choice of adopting inflation targeting in emerging economies: Do domestic institutions matter?," Post-Print hal-00539713, HAL.
    3. Barbara Meller, 2013. "The two-sided effect of financial globalization on output volatility," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 149(3), pages 477-504, September.
    4. Yang, Benhua, 2011. "Political democratization, economic liberalization, and growth volatility," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 245-259, June.
    5. Sato, Masayuki & Samreth, Sovannroeun & Sasaki, Kengo, 2013. "The Stability of Sustainable Development Path and Institutions: Evidence from Genuine Savings Indicators," MPRA Paper 48983, University Library of Munich, Germany.
    6. Andrew Williams, 2014. "The effect of transparency on output volatility," Economics of Governance, Springer, vol. 15(2), pages 101-129, May.
    7. Sugata Ghosh & Andros Gregoriou & Anirban Mitra, 2013. "On the Role of Democracy in the Ethnicity-Growth Relationship: Theory and Evidence," CEDI Discussion Paper Series 13-02, Centre for Economic Development and Institutions(CEDI), Brunel University.
    8. Klomp, Jeroen & de Haan, Jakob, 2009. "Political institutions and economic volatility," European Journal of Political Economy, Elsevier, vol. 25(3), pages 311-326, September.

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