Two to Tangle: Financial Development, Political Instability and Economic Growth in Argentina (18962000)
by Nauro F Campos, Menelaos G. Karanasos, Bin Tan
(October 2008)
published in: Journal of Banking and Finance, 2012, 36 (1), 290 - 304

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.
Text: See Discussion Paper No. 3752