Authors: Antonios Sarantidis, Dimitrios Asteriou

Title: Political Instability and Economic Growth in Greece

Abstract

In this paper, we will empirically examine the relationship between political instability and economic growth for the country of Greece. We will use quarterly time series data that spans from 1970 to 2013 in order to capture the various effects of political instability. We will include in our analysis eight variables, as proxies, that quantify political instability in order to examine the influence and the effects they have on the economic growth of Greece. For the empirical part of this paper, we will construct a set of new technical variables by using the principal component analysis and then we will employ the econometric models of GARCH and GARCH-M. These models will allow us to test the effects of political instability on the conditional variance of GDP growth. The paper contributes to the current literature by providing a deeper understanding on the important topic of political instability in Greece. Furthermore, it explores and quantifies for the first time the effects of the events that have happened over a period of 30 years.