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

Nauro Campos, Menelaos G. Karanasos () and Bin Tan
Additional contact information
Menelaos G. Karanasos: Brunel University
Bin Tan: Southwest Jiaotong University

No 3752, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: volatility; financial development; economic growth; political instability; power-ARCH (search for similar items in EconPapers)
JEL-codes: C14 D72 E23 O40 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2008-10
New Economics Papers: this item is included in nep-dev, nep-fdg, nep-mac and nep-pol
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Published - published in: Journal of Banking and Finance, 2012, 36 (1), 290 - 304

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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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