The role of political stability on economic performance: The case of Bangladesh

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Journal Article
Journal of Economic Cooperation and Development, 2013, 34 (3), pp. 61 - 99
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Political stability generally plays pivotal role in the process of economic development of any country. In this paper, we investigated the direct effect of political stability on the economic performance of Bangladesh for the period of 1984-2009. Two different techniques of cointegration have been used to analyse the long run and short run effect. The Engle-Granger method of cointegration did not find any cointegration while Bound Testing Approach did.Once cointegration is found the long run relationship as well as the short run relationship is established. Our findings indicate that political stability has negative effect on economic performance in long term while the short run effect is positive. This result is rare but not unique as it supports to the work of Goldsmith (1987) to shed light on Mancur Olson's theory of political stability and growth.
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