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Empirical Economics

, Volume 45, Issue 2, pp 987–1008 | Cite as

Democracy and economic growth in Sub-Saharan Africa: a panel data approach

  • Vishal Chandr Jaunky
Article

Abstract

This paper studies the link between democracy and economic development for 28 countries of Sub-Saharan Africa for the period 1980–2005 in a panel data framework. A democracy index constructed from the Freedom House indices. A variety of panel data unit root and cointegration tests are applied. The variables are found to be integrated of order one and cointegrated. The Blundell–Bond system generalized methods-of-moments is employed to conduct a panel error-correction mechanism based causality test within a vector autoregressive structure. Economic growth is found to cause democracy in the short-run, while bidirectionality is uncovered in the long-run. In addition, the long-run coefficients are estimated through the panel fully modified ordinary least squares and dynamic ordinary least squares methods. Democracy has a positive impact on GDP and vice versa. These results lend support to the virtuous cycle hypothesis.

Keywords

Democracy GDP SSA Panel data 

JEL Classification

C33 O40 

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Copyright information

© Springer-Verlag 2012

Authors and Affiliations

  1. 1.Centre for Energy Policy and EconomicsETH ZürichZurichSwitzerland

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