Political Stability and Economic Growth in Asia

Abstract

This study investigates the effects of various factors of political instability on economic growth in selected ten Asian economies during 1990-2005. Our empirical findings show a close relationship between political stability and economic growth. We have analyzed the data by using ordinary least squire econometrics methods, which conclude that 32.35 scores increasing of index of political stability leads to one percent increase in economic growth. From these finding based on Asia experiences, we can conjecture that political stability plays a dominant role in determination of economic growth and sources of capital accumulation. This study uses the average proportion methods and Tinbergen diagrams to show the relative importance of political stability than economic freedom to accumulate capital, measured by four sources of capital accumulation which are proximate causes for economic growth. The results also clearly show that the role of political stability in accelerating economic growth is more vital than economic freedom.

Analysis of Socioeconomic Factors that Dampen the Flow of Foreign Direct Investment

“…However, found political stability as negatively effecting FDI inflows. Apart from this that; political stability adds to economic wellbeing (GDP growth), as found by Younis et al (2008), mixed results are found while looking for effects of political stability towards FDI inflows 3 .…”

“…In case of Asian Economies, political stability stands as vital in its role for economic growth. Its effects are transformed to economic growth of a particular country in response to accumulation of capital, in terms of human capital, and foreign capital inflows, such as FDI (Younis, Lin, & Sharahili, 2008).…”

Are optimistic expectations keeping the Chinese happy?

“…2 In this paper, we intend to quantify the role of optimistic economic expectations in keeping the Chinese happy, amidst all the social and economic 1 Examples of this idea from public think-tanks and political scientists include Holbig (2006), Giessmann (2007), and Zeng (2003). 2 Younis et al (2008), looking at the di¤erential growth experience across South Asian countries in the past few decades, indeed also suggest that political stability and economic growth go hand in hand, though they cannot ascertain the main direction of causality. 1 changes.…”

Political Stability and Balance of Payment: An Empirical Study in Asia

“…The index for political stability is obtained from previous study [10] . Index for political stability covers nine variables, which are longevity of the regime, Election density ratio, Increase in the number of political parties, Strength of ruling party, Military expenditure as a percentage of GDP, Index of democratization, Composite of ICRG risk rating, Numbers of persons internally displaced and Increment of political parities in national assembly.…”

“…The data on balance of payment is taken from world development report [10] . Table in Gross international reserves and exchange rate stability are indicators of nature of overall balance of payment.…”