The effects of socio-cultural and political factors on selected macroeconomic variables

Economy plays an important role in human life. Beliefs, cultures and life styles, and thus the lives of people in political decisions are directed to the economic decisions. But how much the economy affected from which sociological, cultural and political values is questionable. In this study, the effect of religion and democracy, which are huge factors in social and political life on economy is investigated. The selected macroeconomic variables are foreign trade, foreign direct investment and economic growth. As religion Islam, Christianity and other religions dummy variables are used. As democracy, civil liberties and political rights indices are used. The effects of religion and democracy on selected macroeconomic variables are analysed by using feasable generalised least square (FGLS) panel data method using data of 71 countries and period from 1994-2007. According to results, religion and democracy have impacts on macroeconomic variables. Democracy has a positive effect on foreign direct investment but not on foreign trade and economic growth. Christianity has a positive impact on foreign trade but Islam and other religions have the negative effects. However, this situation is reversed for the foreign trade and economic growth.