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An Econometric Study of the Role of the Political Stability on the Relationship between Democracy and Economic Growth

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  • Nedra Baklouti
  • Younes Boujelbene

Abstract

This article examines the nexus between democracy and economic growth while taking into account the role of political stability, using dynamic panel data model estimated by means of the Generalized Method of Moments (GMM) over the period 1998 to 2011 for 17 Middle East and North Africa (MENA) countries. Our empirical results showed that there is a bidirectional causal relationship between democracy and economic growth. Moreover, it was found that the effect of democracy on economic growth depends on the political stability. The results also indicated that there is important complementarity between political stability and democracy. In fact, political stability is a key determinant variable of economic growth. Eventually, democracy and political stability, taken together, have a positive and statistically significant effect on economic growth. This finding suggests that, if accompanied by a stable political system, democracy can contribute to the economic growth of countries. Thus, the MENA governments should use policies to promote political stability in the region. Key words: Political stability, Democracy, Economic growth, MENA countries. JEL: C33, F68, O11, O43, P16, P26. Ekonometrijska studija o ulozi političke stabilnosti na odnos između demokratije i ekonomskog rasta Rad ispituje vezu između demokratije i ekonomskog rasta uzimajući u obzir ulogu političke stabilnosti, upotrebom dinamičkog panel modela ocenjenog pomoću metoda uopštenih momenata (GMM) tokom perioda od 1998. do 2011. godine za 17 zemalja Bliskog istoka i severne Afrike (MENA). Naši empirijski rezultati su pokazali da postoji dvosmerna uzročna veza između demokratije i ekonomskog rasta. Osim toga, utvrđeno je da efekat demokratije na ekonomski rast zavisi od političke stabilnosti. Rezultati takođe ukazuju da postoji značajna komplementarnost između političke stabilnosti i demokratije. U stvari, politička stabilnost je ključna odrednica promenljive ekonomskog rasta. Konačno, demokratija i politička stabilnost, uzeti zajedno, imaju pozitivan i statistički značajan uticaj na ekonomski rast. Ovaj nalaz ukazuje na to da, ako je povezana sa stabilnim političkim sistemom, demokratija može da doprinese privrednom rastu zemalja. Dakle, vlade MENA zemalja treba da koriste politike da promovišu političku stabilnost u regionu. Ključne reči: politička stabilnost, demokratija, ekonomski rast, MENA zemlje.

Suggested Citation

  • Nedra Baklouti & Younes Boujelbene, 2020. "An Econometric Study of the Role of the Political Stability on the Relationship between Democracy and Economic Growth," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 67(2), pages 187-206.
    • Handle: RePEc:voj:journl:v:67:y:2020:i:2:p:187-206:id:526
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    Keywords

    Political stability; Democracy; Economic growth; MENA countries;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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