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Does Political Stability Matter for the UK and the USA? The Time Variant Analysis through Rolling Window Causality Approach

Author

Listed:
  • Ali Sajid

    (Department of Public Administration, Karachi University & IQRA University, Karachi, Pakistan.)

  • Raza Syed Ali

    (Department of Business Administration, IQRA University, Karachi, Pakistan & Adnan Kassar School of Business, Lebanese American University, Beirut, Lebanon.)

  • Ahmed Maiyra

    (Iqra University, Karachi, Pakistan)

Abstract

The study aims to examine the time-varying causality between political stability and economic growth. Secondly, study also evaluates the effect of political stability on economic growth of the United Kingdom and the United States. Therefore, a time-series model is proposed to assess the framework’s constancy with time, which assumes that the coefficients are stable throughout time. A rolling window technique has been applied to the dataset from the year 2002 to 2019, respectively. The results indicate that the time-varying positive bidirectional causality is present between political stability and economic growth for a particular subsample, verifying the effect of political stability on economic growth and vice versa. Hence, our results exhibit that the connection between two-series would benefit the economy due to the positive yet significant relationship. Therefore, uncertain political conditions would directly affect the economy’s growth rate in terms of tourism, currency value, investment, and other growth factors. Whereas, if the uncertainty regarding the political environment reduces, it would be advantageous for economic development.

Suggested Citation

  • Ali Sajid & Raza Syed Ali & Ahmed Maiyra, 2024. "Does Political Stability Matter for the UK and the USA? The Time Variant Analysis through Rolling Window Causality Approach," Zagreb International Review of Economics and Business, Sciendo, vol. 27(2), pages 75-100.
    • Handle: RePEc:vrs:zirebs:v:27:y:2024:i:2:p:75-100:n:1004
    DOI: 10.2478/zireb-2024-0018
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    More about this item

    Keywords

    Brexit; Political stability; Economic growth; Rolling Window Causality;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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