Fighting inflation in developing countries: Does democracy help? An empirical investigation

Abdoul' Ganiou Mijiyawa
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Abdoul' Ganiou Mijiyawa: CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique

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Abstract: Using the date of independence as an instrument for democratic institutions, and data over the period 1960-2003, I find a positive and significant effect of democracy on inflation in a sample of 62 developing countries. Democracy increases inflation because democracy stimulates money creation and compromises trade liberalisation. When I exclude Latin American countries from my sample, democracy has a positive but insignificant effect on inflation. This suggests that the significant effect of democracy is due to Latin American countries experiences. Thus, my results reconcile two views: one that 'populist democracy' is a Latin American phenomenon; and the other that democracy does not necessarily induce better macroeconomic management in developing countries.

Keywords: democracy; inflation; median voter; stabilisation policies; weak instruments test (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (1)

Published in Journal of International Development, 2011, 23, pp.656-696

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00628423

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