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Two to Tangle: Financial Development, Political Instability and Economic Growth in Argentina (1896–2000)

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Author Info
Campos, Nauro F. () (Brunel University)
Karanasos, Menelaos G. () (Brunel University)
Tan, Bin () (Brunel University)

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Abstract

This paper investigates the effects of financial development and political instability on economic growth in a power-ARCH framework with data for Argentina from 1896 to 2000. Our findings suggest that (i) informal or unanticipated political instability (e.g., guerrilla warfare) has a direct negative impact on growth; (ii) formal or anticipated instability (e.g., cabinet changes) has an indirect (through volatility) impact on growth; (iii) the effect of financial development is positive and, surprisingly, not via volatility; (iv) the informal instability effects are much larger in the short- than in the long-run; and (v) the impact of financial development on economic growth is negative in the short- but positive in the long-run.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3752.

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Length: 38 pages
Date of creation: Oct 2008
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Handle: RePEc:iza:izadps:dp3752

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Related research
Keywords: economic growth; financial development; volatility; political instability; power-ARCH;

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Find related papers by JEL classification:
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
E23 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Production
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

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