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A Study on Regime Type and Globalization in Simultaneous Equation Framework

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  • Sudhanshu K. Mishra

    (North-Eastern Hill University)

Abstract

In this study we build a simultaneous equation model in which the measures of different aspects of globalization (attributable to KOF) and different aspects of democracy (attributable to EIU) are related in seven structural equations. A bi-directional relationship between democracy and globalization is visualized. The model is estimated by the conventional 2-SLS as well as a modified 2-SLS in which Shapley value regression is used at the second stage of 2-SLS. On the basis of our analysis, we document several findings. First, we find that democracy and globalization promote each other and hence there is a bi-directional causality with positive relationships running both ways between democracy and globalization. At a national level, there may be various intermediary conditions that modify the relationship as well as set in motion a complex of positive and/or negative feedbacks to accelerate or retard the pace of globalization and democratization in a country-specific manner. However, when a large number of countries are studied, a clear relationship emerges out. Second, there is a need to estimate the structural coefficients of the model cautiously since the regression equations may be suffering from collinearity among the predictor variables. The Shapley value regression based 2-SLS has performed better than the conventional regression in estimating the structural parameters of the model. Third, the system methods of estimation of the model gives better results than what are obtained by the single equation methods of estimation of structural parameters of the model.

Suggested Citation

  • Sudhanshu K. Mishra, 2018. "A Study on Regime Type and Globalization in Simultaneous Equation Framework," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 2(1), pages 99-128.
    • Handle: RePEc:trp:01jefa:jefa0014
    DOI: http://dx.doi.org/10.1991/jefa.v2i1.a14
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    References listed on IDEAS

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    1. Barry Eichengreen & David Leblang, 2008. "Democracy And Globalization," Economics and Politics, Wiley Blackwell, vol. 20(3), pages 289-334, November.
    2. Sudhanshu K. MISHRA, 2017. "Almost equi-marginal principle based composite index of globalization: China, India and Pakistan," Journal of Economic and Social Thought, KSP Journals, vol. 4(3), pages 335-351, Seprember.
    3. Kollias Christos & Paleologou Suzanna Maria, 2016. "Globalization and Democracy: A Disaggregated Analysis by Income Group," Global Economy Journal, De Gruyter, vol. 16(2), pages 213-228, June.
    4. Sudhanshu K. MISHRA, 2016. "Shapley Value Regression and the Resolution of Multicollinearity," Journal of Economics Bibliography, KSP Journals, vol. 3(3), pages 498-515, September.
    5. Sudhanshu K Mishra, 2013. "Global Optimization of Some Difficult Benchmark Functions by Host-Parasite Coevolutionary Algorithm," Economics Bulletin, AccessEcon, vol. 33(1), pages 1-18.
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    7. Acemoglu, Daron & Robinson, James A., 2006. "Economic Backwardness in Political Perspective," American Political Science Review, Cambridge University Press, vol. 100(1), pages 115-131, February.
    8. Axel Dreher, 2006. "Does globalization affect growth? Evidence from a new index of globalization," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1091-1110.
    9. Mishra, SK, 2017. "Are Democratic Regimes Antithetical to Globalization?," MPRA Paper 83321, University Library of Munich, Germany.
    10. Smith, Gary N & Brainard, William C, 1976. "The Value of A Priori Information in Estimating a Financial Model," Journal of Finance, American Finance Association, vol. 31(5), pages 1299-1322, December.
    11. Lipset, Seymour Martin, 1959. "Some Social Requisites of Democracy: Economic Development and Political Legitimacy1," American Political Science Review, Cambridge University Press, vol. 53(1), pages 69-105, March.
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    More about this item

    Keywords

    Simultaneous equations model; Two-Stage Least Squares; Instrumental Variables; Collinearity; Shapley Value Regression; Democracy Index; Globalization Index.;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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