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Growth, Volatility and Political Instability: Non-Linear Time-Series Evidence for Argentina, 1896–2000

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  • Campos, Nauro F

    ()
    (Brunel University)

  • Karanasos, Menelaos G.

    ()
    (Brunel University)

Abstract

What is the relationship between economic growth and its volatility? Does political instability affect growth directly or indirectly, through volatility? This paper tries to answer such questions using a power-ARCH framework with annual time series data for Argentina from 1896 to 2000. We show that while assassinations and strikes (what we call “informal” political instability) have a direct negative effect on economic growth, “formal” political instability (constitutional and legislative changes) has an indirect (through volatility) negative impact. We also find preliminary support for the idea that while the effects of “formal” instability are stronger in the long-run, those of “informal” instability are stronger in the short-run.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3087.

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Length: 11 pages
Date of creation: Oct 2007
Date of revision:
Publication status: published in: Economics Letters, 2008, 100 (1), 135-137
Handle: RePEc:iza:izadps:dp3087

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Keywords: power-ARCH; political instability; volatility; economic growth;

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References

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  1. Stilianos Fountas & Menelaos Karanasos, 2002. "Inflation, Output Growth, and Nominal and Real Uncertainty: Empirical Evidence for the G7," Working Papers, National University of Ireland Galway, Department of Economics 0064, National University of Ireland Galway, Department of Economics, revised 2002.
  2. Karanasos, Menelaos & Kim, Jinki, 2006. "A re-examination of the asymmetric power ARCH model," Journal of Empirical Finance, Elsevier, Elsevier, vol. 13(1), pages 113-128, January.
  3. Ding, Zhuanxin & Granger, Clive W. J. & Engle, Robert F., 1993. "A long memory property of stock market returns and a new model," Journal of Empirical Finance, Elsevier, Elsevier, vol. 1(1), pages 83-106, June.
  4. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  5. Shields, KalvInder & Kevin B Grier & Olan T Henry & Nilss Olekalns, 2003. "The Asymmetric Effects of Uncertainty on Inflation and Output Growth," Royal Economic Society Annual Conference 2003, Royal Economic Society 187, Royal Economic Society.
  6. Johnson, Paul & Durlauf, Steven N & Temple, Johnathan R. W., 2004. "Growth Econometrics," Vassar College Department of Economics Working Paper Series 61, Vassar College Department of Economics.
    • Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677 Elsevier.
  7. Campos, Nauro F. & Nugent, Jeffrey B., 2002. "Who is afraid of political instability?," Journal of Development Economics, Elsevier, Elsevier, vol. 67(1), pages 157-172, February.
  8. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  9. Asteriou, Dimitrios & Price, Simon, 2001. "Political Instability and Economic Growth: UK Time Series Evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(4), pages 383-99, September.
  10. James Murdoch & Todd Sandler, 2002. "Civil wars and economic growth: A regional comparison," Defence and Peace Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(6), pages 451-464.
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Cited by:
  1. Christian Conrad & Menelaos Karanasos & Ning Zeng, 2008. "Multivariate Fractionally Integrated APARCH Modeling of Stock Market Volatility: A multi-country study," Working Papers 0472, University of Heidelberg, Department of Economics, revised Jul 2008.
  2. Hartwell , Christopher A., 2014. "The impact of institutional volatility on financial volatility in transition economies: a GARCH family approach," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 6/2014, Bank of Finland, Institute for Economies in Transition.
  3. Campos, Nauro F. & Karanasos, Menelaos G. & Tan, Bin, 2012. "Two to tangle: Financial development, political instability and economic growth in Argentina," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(1), pages 290-304.
  4. Campos, Nauro F & Karanasos, Menelaos G. & Tan, Bin, 2008. "Two to Tangle: Financial Development, Political Instability and Economic Growth in Argentina (1896–2000)," IZA Discussion Papers 3752, Institute for the Study of Labor (IZA).
  5. Jacek Rothert, 2009. "Monitoring, Moral Hazard and Turnover," Department of Economics Working Papers, The University of Texas at Austin, Department of Economics 130124, The University of Texas at Austin, Department of Economics, revised Sep 2012.

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