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

Nauro F. Campos () and Menelaos Karanasos

No wp891, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan Stephen M. Ross Business School

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.

Keywords: economic growth; volatility; political instability; power-ARCH (search for similar items in EconPapers)
JEL-codes: C14 D72 E23 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pol
Date: 2007-09-01
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Persistent link: http://EconPapers.repec.org/RePEc:wdi:papers:2007-891

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