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Democracy, Political Stability and Economic Growth: A Panel Data Analysis of Selected Asian Countries

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  • Mahmood ul Hasan
  • Nawazish Ameer Haider
  • Saif Ullah

Abstract

There are rare studies that have estimated the relationship between political capital and the economic growth of Asian countries. The primary objective of this study is to explore the straight and subsidiary effect of the political variables on the economic development of selected Asian developing countries. Furthermore, the study attempts to explore the direct consequences of democracy, stable governance, and government effectiveness on the GDP growth of selected Asian countries. The study also examines the indirect effect of political freedom, government stability, and governance efficiency on economic growth through intervening variables. This study was carried out from 2002 to 2019 for selected Asian countries. There are multiple dimensions of political capital, but the current study uses joint proxies, distinguishing it from the literature. The role of political capital in determining the economic growth of selected Asian developing countries is the major agenda of this study. Panel Fixed Effect and Random Effect techniques are used to determine the effect of political variables on economic growth, while the Hausman test is applied as a diagnostic measure to decide the appropriateness of Fixed Effect and Random Effect models. The results found positive direct and indirect effects of the entire political variables except for economic freedom, which negatively affects economic growth for selected Asian developing countries. The current study suggested that democracy can play a pivoting role in the economic growth of selected countries if they maintain political stability and reduce non-developmental expenditures.

Suggested Citation

  • Mahmood ul Hasan & Nawazish Ameer Haider & Saif Ullah, 2023. "Democracy, Political Stability and Economic Growth: A Panel Data Analysis of Selected Asian Countries," Journal of Economic Impact, Science Impact Publishers, vol. 5(1), pages 92-99.
    • Handle: RePEc:adx:journl:v:5:y:2023:i:1:p:92-99
    DOI: 10.52223/jei5012311
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    References listed on IDEAS

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