Study of Casual Relationship Between Democracy and Economic Growth by Using Panel Data

The relationship between democracy and economic growth has been one of the most important issues in recent years. Some economists believe that increased democracy and political freedom result in the economic growth. On the other hand, many politicians suggest that any increase in the growth rate and material welfare improvement of the society gives rise to the demand of democracy. In this paper, these two approaches have been considered using Causality Test and Panel Data for countries. The results indicate a two-way casualty between democracy and economic growth.