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

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  • Nauro Campos

    ()

  • Menelaos Karanasos

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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File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp891.pdf
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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp891.

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Length: pages
Date of creation: 01 Sep 2007
Date of revision:
Handle: RePEc:wdi:papers:2007-891

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

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  1. Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth, Elsevier, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677 Elsevier.
  2. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, American Economic Association, vol. 85(5), pages 1138-51, December.
  3. 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.
  4. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  5. 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.
  6. 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.
  7. Asteriou, Dimitrios & Price, Simon, 2001. "Political Instability and Economic Growth: UK Time Series Evidence," Scottish Journal of Political Economy, Scottish Economic Society, Scottish Economic Society, vol. 48(4), pages 383-99, September.
  8. 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.
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Cited by:
  1. 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).

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