KEY ROLE OF R&D INTENSITY ON POLITICAL AND FINANCIAL STABILITY: EVIDENCE FROM THE G-8 COUNTRIES

Abstract

The concept of globalization has increased the importance of the expenditures on R&D, which are well known as the fundamental source for economic growth of both developing and developed countries. Even though, there have been a great number of studies subjected to the R&D-economic growth relationship, there have rarely been studied on the subject of the relationship among R&D, political stability and financial stability. In this regard, the main scope of this study is to investigate the causal relationships between R&D intensity and political stability and financial stability for G-8 countries during the period 1996-2013. Applying the Dumitrescu-Hurlin panel non-causality test, the empirical findings of this study shows that there exists a causal relationship running from R&D intensity to political stability and financial stability. Moreover, this study shows that R&D intensity has a positive and statistically significant effect on both political and financial stability of the G-8 countries.