Financial Development, Political Instability, Trade Openness and Growth in Brazil: Evidence from a New Dataset, 1890-2003

Nauro Campos, Ekaterina Glebkina (), Menelaos Karanasos () and Panagiotis Koutroumpis ()
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Ekaterina Glebkina: Brunel University London
Menelaos Karanasos: Brunel University London
Panagiotis Koutroumpis: University of Sussex

Open Economies Review, 2023, vol. 34, issue 4, No 4, 861 pages

Abstract: Abstract What is the relationship between financial development, political instability, trade openness and economic growth and how does it change over time? This paper examines these links using a new econometric approach and unique data set. In this paper, we apply the logistic smooth transition model (LST) to annual data for Brazil from 1890 to 2003. The main finding is that financial development has a time-varying effect on economic growth, which depends significantly on (jointly estimated) trade openness thresholds. In addition, political instability displays a negative effect on growth whereas trade openness a positive one. Finally, our estimates show that in 56% of the years in which financial development has a ‘below the mean’ effect, we find that trade openness experiences a substantial ‘above the mean’ change.

Keywords: Economic growth; Financial development; Political instability; Trade openness; Smooth transition models; C14; D72; E23; N96; O40 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11079-022-09684-4

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