POLITICAL INSTITUTIONS AND ECONOMIC GROWTH: A STRUCTURAL VAR APPROACH Hadhek Zouhaier Superior Institut of Gestion (ISG) of Gabès- Tunisia ISG Gabès rue Jilani Habib 6002 Gabès- Tunisia E-mail : hzouhair2000@yahoo.fr Abstract The objective of this paper is to identify and assess the contribution of budgetary, monetary and institutional shocks affecting the economies of some developed and developing countries over the period 1976-2003. The methodology used is vector autoregressive models and structural recent techniques for the analysis of time series related. The empirical results show a significant relationship between the supply shock and institutions on the one hand, and between institutional shocks and economic activity on the other hand, for Tunisia, Indonesia, Brazil and the Democratic Republic of Congo. For Japan we could not detect a significant relationship between institutional shocks and economic activity. Keywords: budgetary shocks, monetary shocks, institutional shocks, structural VAR. JEL: C22, O43, O47, E11. 1. Introduction Since the contribution of Sims (1980), VAR models are considered the most suitable methodological framework for the analysis of fluctuations in terms of innovations. Recent developments in the field of time series analysis have enabled the development of this methodological approach. Restrictions identifying structural forms, lack of exogeneity tests and inadequate treatment of expectations are the most common criticisms addressed to Keynesian models. Based on these criticisms, Sims (1980) proposes estimating a reduced form multivariate autoregressive and without constraints. VAR modeling is to consider all causal relationships between variables of a system without seeking the exogeneity of a particular variable and avoids imposing a priori constraints. This model also allows the identification of different types of shocks. Thus, the empirical framework proposed by Sims is more favorable to the identification and estimation of different contributions to changes in economic stimulus modeled from statistical innovations. The objective of this work is to identify and assess the contribution of various shocks: budgetary, monetary and especially institutional, affecting the economies of some developed and developing countries. 2. Structure and Identification of VAR As part of this section we will try to identify and assess the contribution of various shocks to macroeconomic variables’ fluctuations for the economies of some developed and developing countries.The countries covered by this empirical study are: Tunisia, Brazil, Democratic Republic of Congo Indonesia and Japan. The study period is: 1976-2003 and observations are annual. 2.1. Choice of variables Deal with the plurality of shock may influence the macroeconomic variables, and given that VAR models do not work properly with a large number of variables (5 variables maximum), a judicious choice of these variables is required. So we opt for the choice of the following: • Real GDP per capita is a measure of real wealth created by the country during a year. This variable is used to generate an innovation generally called supply shock Hadhek Zouhaier, Int. J. Eco. Res., 2011 2(6), 88-109 ISSN: 2229-6158 IJER | NOVEMBER - DECEMBER 2011 Available online@www.ijeronline.com 88