Does Political Stability Matter for the UK and the USA? The Time Variant Analysis through Rolling Window Causality Approach

Ali Sajid (), Raza Syed Ali and Ahmed Maiyra
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Ali Sajid: Department of Public Administration, Karachi University & IQRA University, Karachi, Pakistan.
Raza Syed Ali: Department of Business Administration, IQRA University, Karachi, Pakistan & Adnan Kassar School of Business, Lebanese American University, Beirut, Lebanon.
Ahmed Maiyra: Iqra University, Karachi, Pakistan

Zagreb International Review of Economics and Business, 2024, vol. 27, issue 2, 75-100

Abstract: The study aims to examine the time-varying causality between political stability and economic growth. Secondly, study also evaluates the effect of political stability on economic growth of the United Kingdom and the United States. Therefore, a time-series model is proposed to assess the framework’s constancy with time, which assumes that the coefficients are stable throughout time. A rolling window technique has been applied to the dataset from the year 2002 to 2019, respectively. The results indicate that the time-varying positive bidirectional causality is present between political stability and economic growth for a particular subsample, verifying the effect of political stability on economic growth and vice versa. Hence, our results exhibit that the connection between two-series would benefit the economy due to the positive yet significant relationship. Therefore, uncertain political conditions would directly affect the economy’s growth rate in terms of tourism, currency value, investment, and other growth factors. Whereas, if the uncertainty regarding the political environment reduces, it would be advantageous for economic development.

Keywords: Brexit; Political stability; Economic growth; Rolling Window Causality (search for similar items in EconPapers)
JEL-codes: E02 E61 O17 O43 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:zirebs:v:27:y:2024:i:2:p:75-100:n:1004

DOI: 10.2478/zireb-2024-0018

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