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Political instability and economic growth: Evidence from two decades of transition in CEE

Gurgul, Henryk and Lach, Łukasz (2012): Political instability and economic growth: Evidence from two decades of transition in CEE.

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Abstract

This paper examines the nexus between political instability and economic growth in 10 CEE countries in transition in the period 1990-2009. Our results support the contention that political instability defined as a propensity for government change had a negative impact on growth. On the other hand, there was no causality in the opposite direction. A sensitivity analysis based on the application of a few hundred different variants of the initial econometric model confirmed the abovementioned findings only in the case where major government changes were applied to the definition of political instability.

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