The degree of Economic Openness and Sustaining ethnic peace in Sri Lanka

Abstract

A numerous studies have examined the determinants of sustaining ethnic peace in multi-ethnic developing countries and report on myriad contributary factors including economic, political and cultural issues. It is natural to observe many correlates since ethnic wars tend to gain their own momentum and proceed for a variety of reasons that are not directly related to the initial causes. Sustaining ethnic peace is a constant challenge that policy makers have to grapple with, even in developed countries. Good governance and high and shared economic growth often top the list of conditions necessary to archive ethnic peace. How to get good governance with high and shared growth in Sri Lanka are key questions. In this framework, the purpose of this paper is to draw attention to the conditions necessary to sustain ethnic peace in Sri Lanka. Paper performs an econometric model based on time series data over the period 1977 to 2009. All the data were gathered from various annual reports of the central bank of Sri Lanka, Pen World Tables, World Development Indicators and Polity IV data set. From the analysis this paper identify the degree of economic openness exerts a highly statistically significant effect on economic growth, improves the quality of governance, and reduces the probability of ethnic conflicts. Once set in motion, openness is likely to generate a virtuous feedback loop between government policies and the socio-economic environment. As the economic pie gets larger it would be easier to implement other policies that are needed for redistribution, social development and ethnic peace