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Economic Resilience in Developing Countries: The Role of Democracy in the Face of External Shocks

Author

Listed:
  • Mohamed Ali Trabelsi

    (University of Tunis El Manar)

  • Salah Ahmed

    (University of Tunis El Manar)

Abstract

In this paper, we examine the role of democracy in strengthening the resilience of developing economies in the face of exogenous negative external shocks. To achieve our research objectives, we use the duration model to estimate how democracy can determine the probable duration of an economic growth spell. Examining a panel of 96 developing countries observed over the 1965-2015 period, we find that democracy is a resilience factor, insofar as it helps to support growth spells in the event of negative external shocks. One implication of this study is the role of democracy in improving living standards in developing coutries. The study may be subject to further research, and more variables that account for major shocks (such as political and civil unrest, internal conflicts, and natural disasters) can be considered. These shocks may occur during a growth period and cause very serious disruptive effects. The results show that an improvement in democracy score is associated with an increase in the expected duration of a growth spell. Another finding is that some dimensions of democratic institutions, such as political participation and egalitarian inclusion, can lead to sustainable economic growth.

Suggested Citation

  • Mohamed Ali Trabelsi & Salah Ahmed, 2021. "Economic Resilience in Developing Countries: The Role of Democracy in the Face of External Shocks," Working Papers 1499, Economic Research Forum, revised 20 Oct 2021.
    • Handle: RePEc:erg:wpaper:1499
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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