Political Stability and Financial Development: Evidence from Turkey

Abstract

The interaction between political decisions and economic indicators constitutes the main subject of political economy and it surfaces the performance that policymakers display in the point of the solution of economic problems. In other words, the most significant results of political decisions have been seen in the field of economy. In this regard, the stability of political decisions and the existence of political stability which is defined as political order affect economic order, development and stability as well. The economic stability that affects the welfare level of one country have several determinants like the macroeconomic indicators such as general level of prices, rate of employment, level of production and balance of payments, and the continuity of political order, the size of military power, corruption, accountability in politics, political transparency and fair distribution of income. In this study, on the other hand, how political stability affects financial development in the field of economy has been researched. For that purpose, Granger causality test has been applied for Turkey by using the data of financial development and political stability belonging to the years of 1970-2017. In the result of analysis, a long-termed relationship between financial development and political stability was discovered and a causality from financial development to political stability was discovered as well.

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