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

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  • Nauro Campos

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  • 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.

Suggested Citation

  • Nauro Campos & Menelaos Karanasos, 2007. "Growth, Volatility & Political Instability: Non Linear Time Series Evidence for Argentina 1896-2000," William Davidson Institute Working Papers Series wp891, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2007-891
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/64428/1/wp891.pdf
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    References listed on IDEAS

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    1. 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.
    2. Kevin B. Grier & Ólan T. Henry & Nilss Olekalns & Kalvinder Shields, 2004. "The asymmetric effects of uncertainty on inflation and output growth," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(5), pages 551-565.
    3. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, April.
    4. 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 383-399, September.
    5. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, vol. 85(5), pages 1138-1151, December.
    6. Fountas, Stilianos & Karanasos, Menelaos, 2007. "Inflation, output growth, and nominal and real uncertainty: Empirical evidence for the G7," Journal of International Money and Finance, Elsevier, vol. 26(2), pages 229-250, March.
    7. Karanasos, Menelaos & Kim, Jinki, 2006. "A re-examination of the asymmetric power ARCH model," Journal of Empirical Finance, Elsevier, vol. 13(1), pages 113-128, January.
    8. James Murdoch & Todd Sandler, 2002. "Civil wars and economic growth: A regional comparison," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(6), pages 451-464.
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    Cited by:

    1. Campos, Nauro F & Karanasos, Menelaos & Tan, Bin, 2008. "Two to Tangle: Financial Development, Political Instability and Economic Growth in Argentina (1896-2000)," CEPR Discussion Papers 7004, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

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

    JEL classification:

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

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