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Democracy and economic growth in Sub-Saharan Africa: a panel data approach

Jaunky, Vishal

In: Empirical Economics, 2013, vol. 45, no. 2, p. 987-1008

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    Title
    • Democracy and economic growth in Sub-Saharan Africa: a panel data approach
    Author
    • Jaunky, Vishal. Centre for Energy Policy and Economics, ETH Zürich, Zürichbergstrasse 18, 8032, Zurich, Switzerland
    Document Type
    • Postprint
    OAI-PMH Identifier
    • oai:doc.rero.ch:321032
    Summary
    This paper studies the link between democracy and economic development for 28 countries of Sub-Saharan Africa for the period 1980-2005 in a panel data framework. A democracy index constructed from the Freedom House indices. A variety of panel data unit root and cointegration tests are applied. The variables are found to be integrated of order one and cointegrated. The Blundell-Bond system generalized methods-of-moments is employed to conduct a panel error-correction mechanism based causality test within a vector autoregressive structure. Economic growth is found to cause democracy in the short-run, while bidirectionality is uncovered in the long-run. In addition, the long-run coefficients are estimated through the panel fully modified ordinary least squares and dynamic ordinary least squares methods. Democracy has a positive impact on GDP and vice versa. These results lend support to the virtuous cycle hypothesis