Two to Tangle: Financial Development, Political Instability and Economic Growth in Argentina (1896-2000)

Nauro Campos, Menelaos Karanasos and Bin Tan

No 7004, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper investigates the effects of financial development and political instability on economic growth in a power-ARCH framework with data for Argentina from 1896 to 2000. Our findings suggest that (i) informal or unanticipated political instability (e.g., guerrilla warfare) has a direct negative impact on growth; (ii) formal or anticipated instability (e.g., cabinet changes) has an indirect (through volatility) impact on growth; (iii) the effect of financial development is positive and, surprisingly, not via volatility; (iv) the informal instability effects are much larger in the short- than in the long-run; and (v) the impact of financial development on economic growth is negative in the short- but positive in the long-run.

Keywords: Economic growth; Financial development; Political instability; Power-arch; Volatility (search for similar items in EconPapers)
JEL-codes: C14 D72 E23 O40 (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-dev, nep-fdg, nep-mac and nep-pol
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Working Paper: Two to Tangle: Financial Development, Political Instability and Economic Growth in Argentina (1896–2000) (2008)
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