Political Instability and Economic Growth in Egypt

Hossam Eldin Mohammed Abdelkader 1
  • 1 Ain Shams University-Faculty of Commerce, Economic Department, Cairo, Egypt
Dr. Hossam Eldin Mohammed Abdelkader

Abstract

This paper explores the relationship between political instability and economic growth in Egypt. The literature claims there is a relationship between political instability and economic performance. Empirical studies, however, show different results for different world regions, different countries, and different periods. Studies concerning the effect of political instability on the economic growth path are rich with cases from several countries, but do not include developing countries, such as Egypt. This paper investigates the robust relationship between economic growth in Egypt and political instability in the last five decades. We examine time-series data from 1972 to 2013, using the Cointegration approach to determine the short-term and long-term relationships. Consequently, we use an Error-Correction Model (ECM) to estimate the relationship between economic growth and political instability in Egypt. The results show that the impact of political instability on economic growth is negative and significant for all indexes of political instability used in the case of Egypt. The results have implications for policymakers who are planning for the economic growth of the country in the short- and long-term.

  • Aisen, A., and F.J. Veiga. 2013. “How Does Political Instability Affect Economic Growth?” European Journal of Political Economy 29: 151–167.

    • Crossref
    • Export Citation
  • Alesina, A., S. Özler, N. Roubini, and P. Swagel. 1996. “Political Instability and Economic Growth.” Journal of Economic Growth 1 (2): 189–211.

    • Crossref
    • Export Citation
  • Banks, A.S., and K.A. Wilson. 2016. Cross-National Time-Series Data Archive. Jerusalem, Israel: Databanks International.

  • Barro, R.J. 1989. A Cross-Country Study of Growth, Saving, and Government. USA: University of Chicago Press.

  • Beck, T., G. Clarke, A. Groff, P. Keefer, and P. Walsh. 2001. “New Tools in Comparative Political Economy: The Database of Political Institutions.” The World Bank Economic Review 15 (1): 165–176.

    • Crossref
    • Export Citation
  • Bernal-Verdugo, L.E., D. Furceri, and D.M. Guillaume. (2013).IMF Working Paper Washington, D. C: Research Department. International Monetary Fund (IMF) The Dynamic Effect of Social and Political Instability on Output: The Role of Reforms.

  • Brunetti, A., and B. Weder. 1995. “Political Sources of Growth: A Critical Note on Measurement.” Public Choice 82 (1/2): 125–134.

    • Crossref
    • Export Citation
  • Carmignani, F. 2003. “Political Instability, Uncertainty and Economics.” Journal of Economic Surveys 17 (1): 1–54.

    • Crossref
    • Export Citation
  • Chow, G.C. 1960. “Tests of Equality between Sets of Coefficients in Two Linear Regressions.” Econometrica: Journal of the Econometric Society 28 (3): 591–605.

    • Crossref
    • Export Citation
  • Coppedge, M., J. Gerring, S.I. Lindberg, and S.-E. Skaaning. 2016. Varieties of Democracy (V-Dem) Codebook. USA: University of Gothenburg (V-Dem Institute) and University of Notre Dame (Kellogg Institute) (March ed., Vol. Version 6).

  • Dahlberg, S., S. Holmberg, B. Rothstein, A. Khomenko, and R. Svensson. 2017. The Quality of Government (Qog) Basic Dataset. Gothenburg, Sweden: University of Gothenburg: The Quality of Government Institute.

  • Dickey, D.A., and W.A. Fuller. 1979. “Distribution of the Estimators for Autoregressive Time Series with a Unit Root.” Journal of the American Statistical Association 74 (366): 427–431.

  • Doornik, J.A., and H. Hansen. 1994. “An Omnibus Test for Univariate and Multivariate Normality.”. Oxford: University of Oxford Economic Discussion Paper.

  • Doornik, J.A., and H. Hansen. 2008. “An Omnibus Test for Univariate and Multivariate Normality.” Oxford Bulletin of Economics and Statistics 70 (s1): 927–939.

    • Crossref
    • Export Citation
  • Doornik, J.A., and D.F. Hendry. 2009. Empirical Econometric Modelling PcGive 13: Volume I. London: Timberlake Consultants Ltd (Vol. Volume I).

  • Engle, R.F. 1982. “Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation.” Econometrica 50 (4): 987–1007.

    • Crossref
    • Export Citation
  • Fosu, A.K. 1992. “Political Instability and Economic Growth: Evidence from Sub-Saharan Africa.” Economic Development and Cultural Change 40 (4): 829–841.

    • Crossref
    • Export Citation
  • Godfrey, L.G. 1978. “Testing for Multiplicative Heteroskedasticity.” Journal of Econometrics 8 (2): 227–236.

    • Crossref
    • Export Citation
  • Goemans, H.E., K.S. Gleditsch, and G. Chiozza. 2016. ARCHIGOS: A Data Set on Leaders 1875–2015. New York, USA: University of Rochester (February 29. ed., Vol. Version 4.1).

  • Granger, C.W.J. 1966. “The Typical Spectral Shape of an Economic Variable.” Econometrica 34 (1): 150–161.

    • Crossref
    • Export Citation
  • Granger, C.W.J., and P. Newbold. 1974. “Spurious Regressions in Econometrics.” Journal of Econometrics 2 (2): 111–120.

    • Crossref
    • Export Citation
  • Gyimah-Brempong, K., and S.M.D. Camacho. 1998. “Political Instability, Human Capital, and Economic Growth in Latin America.” The Journal of Developing Areas 32 (4): 449–466.

  • Haan, J.D., and C.L.J. Siermann. 1996a. “New Evidence on the Relationship between Democracy and Economic Growth.” Public Choice 86 (1/2): 175–198.

    • Crossref
    • Export Citation
  • Haan, J.D., and C.L.J. Siermann. 1996b. “Political Instability, Freedom, and Economic Growth: Some Further Evidence.” Economic Development and Cultural Change 44 (2): 339–350.

    • Crossref
    • Export Citation
  • (INSCR) (2017a).Integrated Network for Societal Conflict Research (INSCR) USA: Center for Systemic Peace Major Episodes of Political Violence, Armed Conflict and Intervention (ACI) Datasets.

  • INSCR. State Fragility Index and Matrix Integrated Network for Societal Conflict Research (INSCR) USA: Center for Systemic Peace 2017b.

  • Jarque, C.M., and A.K. Bera. 1980. “Efficient Tests for Normality, Homoscedasticity and Serial Independence of Regression Residuals.” Economics Letters 6 (3): 255–259.

    • Crossref
    • Export Citation
  • Jong-A-Pin, R. 2009. “On the Measurement of Political Instability and Its Impact on Economic Growth.” European Journal of Political Economy 25 (1): 15–29.

    • Crossref
    • Export Citation
  • Kaufmann, D., A. Kraay, and M. Mastruzzi. (2010).Policy Research Working Paper Washington D. C.: The International Bank for Rsconstruction and Development (IBRD)-World Bank The Worldwide Governance Indicators: A Summary of Methodology, Data and Analytical Issues.

  • Kwiatkowski, D., P.C.B. Phillips, P. Schmidt, and Y. Shin. 1992. “Testing the Null Hypothesis of Stationarity against the Alternative of a Unit Root: How Sure are We that Economic Time Series Have a Unit Root?” Journal of Econometrics 54 (1–3): 159–178.

    • Crossref
    • Export Citation
  • MacKinnon, J.G. 2010. “Critical Values for Cointegration Tests.”. Canada: Department of Economics. Queen’s University Working Paper.

  • Marshall, M.G., T.R. Gurr, and K. Jaggers. (2016).Integrated Network for Societal Conflict Research (INSCR) USA: Center for Systemic Peace Polity IV: Political Regime Characteristics and Transitions, 1800–2015, Dataset Users’ Manual.

  • Nelson, C.R., and C.R. Plosser. 1982. “Trends and Random Walks in Macroeconomic Time Series: Some Evidence and Implications.” Journal of Monetary Economics 10 (2): 139–162.

    • Crossref
    • Export Citation
  • Phillips, P.C.B., and P. Perron. 1988. “Testing for a Unit Root in Time Series Regression.” Biometrika 75 (2): 335–346.

    • Crossref
    • Export Citation
  • PRS. International Country Risk Guide (ICRG) Methodology New York, USA: The PRS Group, Inc 2017.

  • Ramsey, J.B. 1969. “Tests for Specification Errors in Classical Linear Least-Squares Regression Analysis.” Journal of the Royal Statistical Society. Series B (Methodological) 31 (2): 350–371.

    • Crossref
    • Export Citation
  • Scully, G.W. 1988. “The Institutional Framework and Economic Development.” Journal of Political Economy 96 (3): 652–662.

    • Crossref
    • Export Citation
  • White, H. 1980. “A Heteroskedasticity-Consistent Covariance Matrix Estimator and A Direct Test for Heteroskedasticity.” Econometrica: Journal of the Econometric Society 48 (4): 817–838.

    • Crossref
    • Export Citation
  • WorldBank. World Development Indicators (WDI) Washington, D. C.: The World Bank 2017.

  • Zivot, E., and D.W.K. Andrews. 1992. “Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis.” Journal of Business & Economic Statistics 10 (3): 251–270.

Purchase article
Get instant unlimited access to the article.
$42.00
Log in
Already have access? Please log in.


or
Log in with your institution

Journal + Issues

The Review of Middle East Economics and Finance (RMEEF) addresses applied original research in the fields of economics and finance pertaining to the MENA region (Middle East and North Africa), including Turkey and Iran. The journal also publishes articles that deal with the economies of neighboring countries and/or the relationship and interactions between those economies and the MENA region.

Search