Political Stability and Economic Growth Nexus: Some New Evidence from D-8 Countries

This study uses panel smooth transition regression (PSTR) model to a investigates the impact of political stability on economic growth for the D-8 countries during 1996 to 2011,. For this purpose, the paper uses the political stability index, GDP growth variable and other variables including education expenditures, government consumption expenditures, agricultural raw materials exports, inflation rate and index of openness. Our empirical results indicate that there is a non-linear relationship between variables under consideration. The results demonstrate that there is one continuous function with two different regimes and a threshold at political stability of -1.592. For the first regime, education expenditures, government consumption expenditures and index of openness variables have a significantly positive impact on GDP growth and political stability, agricultural raw materials exports and inflation rate variables have a significantly negative impact on GDP growth. For the second regime, political stability, education expenditures, agricultural raw materials exports and index of openness variables have a positive impact and government consumption expenditures and inflation rate variables have a negative impact on GDP growth. Though, the impact of education expenditures and index of openness are increased and the impact of inflation rate dramatically declined and political stability, government consumption expenditures and agricultural raw materials exports sign have changed between two regimes.