Munich Personal RePEc Archive

War and peace: why is political stability pivotal for economic growth of OIC countries?

Uddin, Md Akther and Masih, Mansur (2016): War and peace: why is political stability pivotal for economic growth of OIC countries?

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Abstract

Since the end of World War II, Muslim countries have been plagued by sixteen major wars, many coups, political, religious and ethnic insurgency, and revolutions. While many developing countries in southeast Asia have emerged as developed economy in this time period, in spite of having sufficient natural resources, most of the Muslim countries are still fighting with higher inflation, unemployment, poverty, inequality, poor healthcare, illiteracy, and rampant corruption. This paper studies how political stability affects growth in OIC countries by using relatively advanced dynamic GMM and simultaneous quantile regression. It is found that political stability has significant positive effect on growth. The impact of political stability on economic growth is more important for lower income countries than higher income countries. Most of the low to mid income oil dependent OIC countries suffer from chronic misery, higher inflation and persistent unemployment, which has significant negative effect on growth. Oil revenue plays a major role in economic growth for both OIC and Non-OIC oil dependent developing countries. The importance of political stability, economic diversification and macroeconomic stability has been restated with policy recommendations for oil dependent developing countries in general and OIC countries in particular.

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