Democracy and Economic Growth:the Case of Moldova

Abstract

This article addresses the issue of the cause-and-effect relationship between democracy and economic growth in Moldova from 1990 to 2020. This problem is one of the key topics of modern economic political science, but the results concerning the influence of the political system on economy are still ambiguous. No research has been conducted to date on this issue for Moldova. The econometric analysis was conducted using tree composite indexes of democracy, published by Freedom house, Polity V and V-Dem Varieties of Democracy. The causal impact between democracy indexes and per capita GDP growth is tested using Granger causality analysis. The results show that the choice of the democracy indicator and the time interval influences the modeling outcome. All three democracy indices depict different democratic trends at the country level. Although there is a positive causal link between the Polity index and GDP per capita in a short period, other results show no evidence that democratic reforms did contribute to economic growth in Moldova and vice versa. We conclude that democratization in conditions of weak law and political instability contributed to the emergency of a so-called hybrid democracy in Moldova.