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Fighting inflation in developing countries: Does democracy help? An empirical investigation

Abstract : Using the date of independence as an instrument for democratic institutions, and data over the period 1960-2003, I find a positive and significant effect of democracy on inflation in a sample of 62 developing countries. Democracy increases inflation because democracy stimulates money creation and compromises trade liberalisation. When I exclude Latin American countries from my sample, democracy has a positive but insignificant effect on inflation. This suggests that the significant effect of democracy is due to Latin American countries experiences. Thus, my results reconcile two views: one that 'populist democracy' is a Latin American phenomenon; and the other that democracy does not necessarily induce better macroeconomic management in developing countries.
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https://halshs.archives-ouvertes.fr/halshs-00628423
Contributor : Cerdi Etudes & Documents - Publications <>
Submitted on : Monday, October 3, 2011 - 12:04:17 PM
Last modification on : Tuesday, April 20, 2021 - 10:48:06 AM

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Abdoul' Ganiou Mijiyawa. Fighting inflation in developing countries: Does democracy help? An empirical investigation. Journal of International Development, Wiley-Blackwell, 2011, 23, pp.656-696. ⟨halshs-00628423⟩

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