The Role of Political Instability in Stock Market Development and Economic Growth: The Case of Greece |
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Authors: | Dimitrios Asteriou & Costas Siriopoulos |
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Institution: | City University;Costas Siripoulos, University of Macedonia |
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Abstract: | This article examines empirically the relationship between stock market development, political instability and economic growth in Greece. We measure socio-political instability by constructing an index which captures the occurrence of various phenomena of political violence using time-series data. The main advantages of analysing political instability in a case study framework using time-series, in contrast with the widely used cross-country empirical studies, are: (a) a more careful and in-depth examination of institutional and historical characteristics of a particular country; (b) the use of a data set comprised of the most appropriate and highest quality measures; and (c) a more detailed exposition of the dynamic evolution of the economy. The empirical results indicate the existence of a strong negative relationship between uncertain socio-political conditions and the general index of the Athens Stock Exchange (ASE) and support the theoretical hypothesis that uncertain socio-political conditions affect economic growth negatively, is true for the Greek case. (J.E.L.: G10, G14, O40, C32) |
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