Political Stability and Democratic Governance. A Panel Data Analysis

Militiades N. Georgiou, Nicholas Kyriazis and Emmanouil-Marios-Lazaros Economou ()

MPRA Paper from University Library of Munich, Germany

Abstract: In the present paper we undertake to link democracy with a set of indicators for economic freedom and financial crises, using panel data analysis. The sample covers annually the period 2000-2012 for the EU, the USA and Japan. The results point out, that political stability is positively related to the set of economic freedom indicators and negatively to financial crises, because greater economic freedom influences positively investment and economic growth, while financial crises, which lead to austerity policies, which again lead to recession-depression, increases dissatisfaction of citizens with the working of democracy (Georgiou, 2011) and thus, to the rise of extremist parties. Our findings support the idea that democratic stability is linked to economic stability and growth and vice-versa.

Keywords: Democracy; economic freedom; financial crisis; panel data analysis. (search for similar items in EconPapers)
JEL-codes: C23 E10 N40 (search for similar items in EconPapers)
Date: 2015-03-15
New Economics Papers: this item is included in nep-hap and nep-pol
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