Causality Relation Between Political Stability and Economic Determinants: European Union Member Center and Eastern European Transition Economies

In this study, the relationship between political stability and economic determinants in 10 Central and Eastern European transition economies that are members of European Union (Czech Republic, Hungary, Estonia, Latvia, Poland, Lithuania, Slovenia, Slovakia, Romania, Bulgaria) between 2002-2017 was analyzed using the panel causality test developed by Emirmahmutoğlu and Köse (2011). According to the results of the analysis significant causality was identified in Bulgaria and Estonia economies from trade openness to political stability. On the other hand, significant causalities were identified in Lithuanian and Polish economies from consumer price index to political stability, and from unemployment rate to political stability in Latvia, Estonia and Slovenia. In Lithuania, Latvia and Slovenia economies casuality was determined from the dummy variable created based on the membership of the European Union to political stability. There is no causal relationship between the gross domestic product per capita and political stability in any country.

Keywords

political stability, European Union, transition economies, panel causality test