The impacts of political stability on economic growth: Evidence from panel data analysis

This thesis empirically investigates the relationship between political stability and economic growth as well as regulating with regards to consequences concerning labor and physical capital factors in panel data valuation. A model panel data was used encompassing the time between 1994 – 2012 via running a growth model for the selected nations (Ukraine, Romania, Indonesia, Thailand, Ecuador, Brazil). The thesis mainly aims at ascertaining that the political stability and other comparatively vital factors enhance the procedure of economic growth in the light of exogenous modelling structure via utilizing Panel unit root and panel cointegration methods. Estimated outcomes imply that economic growth in the selected nations are in long-term equilibrium relationship; political stability has long-term significant influence on economic growth and consequently, economic growth converge to their long-term equilibrium levels by the means created by Capital. However, the selected countries which are listed as lowest scores in terms of the political stability have long term and short term economic growth effect whereas labor has no impact on economic growth for the selected countries. This supports the reality that political certainty or stability in listed countries as lowest scores in terms of the political stability is capable of stimulate a country’s development process. Outcomes of this survey reveal that there exist a relationship between the political stability of a nation and the economic growth. Keywords: Economic growth, political stability, capital, labor growth.