Two to Tangle: Financial Development, Political Instability and Economic Growth in Argentina (1896-2000)
38 Pages Posted: 19 Oct 2008
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Two to Tangle: Financial Development, Political Instability and Economic Growth in Argentina (1896-2000)
Two to Tangle: Financial Development, Political Instability and Economic Growth in Argentina (1896-2000)
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, volatility, political instability, power-ARCH
JEL Classification: C14, O40, E23, D72
Suggested Citation: Suggested Citation
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