Two to tangle: Financial development, political instability and economic growth in Argentina

This paper studies the impact of financial liberalization on economic growth. It contributes to this literature by using an innovative econometric methodology and a unique data set of historical series. It presents power ARCH estimates for Argentina for the period from 1896 to 2000. The main results show that the long-run effect of financial liberalization on economic growth is positive while the short-run effect is negative, albeit substantially smaller. Interestingly, we find that financial development affects growth only directly, that is, not through growth volatility.

► This paper studies the impact of financial liberalization on economic growth. ► It uses an innovative econometric methodology and data set of historical series. ► It presents power ARCH estimates for Argentina for the period from 1896 to 2000. ► It finds that this impact is positive in the long- and negative in the short-run. ► The impact is substantially smaller in the short- than in the long-run.