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

38 Pages Posted: 19 Oct 2008

See all articles by Nauro F. Campos

Nauro F. Campos

University College London; University of Michigan at Ann Arbor - The William Davidson Institute; IZA Institute of Labor Economics

Menelaos Karanasos

Brunel University London - Economics and Finance

Bin Tan

Brunel University London

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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

Campos, Nauro F. and Karanasos, Menelaos and Tan, Bin, Two to Tangle: Financial Development, Political Instability and Economic Growth in Argentina (1896-2000). IZA Discussion Paper No. 3752, Available at SSRN: https://ssrn.com/abstract=1286690 or http://dx.doi.org/10.2139/ssrn.1286690

Nauro F. Campos (Contact Author)

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

University of Michigan at Ann Arbor - The William Davidson Institute

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Menelaos Karanasos

Brunel University London - Economics and Finance ( email )

Uxbridge UB8 3PH
United Kingdom

Bin Tan

Brunel University London ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

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