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Political Instability and Growth

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  • Dhaneshwar Ghura
  • Benoît Mercereau

Abstract

This paper provides empirical evidence that the propensity for political instability in the Central African Republic (C.A.R.) has been increased by low tax revenues and deteriorations in the terms of trade. The direct effect of political instability on economic growth is not statistically significant, once account is taken of domestic investment, and economic growth in neighboring countries. The policy implications are: (i) mobilization of domestic revenues to pay public employees'' salaries and provide basic social services would lower the probability of coups; (ii) economic diversification would reduce the propensity for adverse terms of trade shocks to fuel coups; and (iii) neighboring countries'' efforts to resolve conflicts and achieve sustained growth would be beneficial for the C.A.R.''s economic performance.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/80.

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Length: 22
Date of creation: 01 May 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/80

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Related research

Keywords: Economic growth; External shocks; Economic conditions; political instability; terms of trade; neighboring countries; trade shocks; terms of trade shocks; social services; civil war; domestic investment; civil wars; rebellions; rebellion; foreign aid; violent conflict; risk of conflict; social unrest; civil conflict; ethnic diversity; political economy; foreign investors; civil conflicts; terms-of-trade shocks; domestic savings; political gains; ethnic group; linguistic group; neoclassical growth model; social fractionalization; ethnic divisions; export crops; foreign assistance; trade shock; arrest;

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References

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  1. Sachs, J-D & Warner, A-M, 1996. "Sources of Slow Growth in African Economies," Papers 545, Harvard - Institute for International Development.
  2. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
  3. Paul Collier & V. L. Elliott & Håvard Hegre & Anke Hoeffler & Marta Reynal-Querol & Nicholas Sambanis, 2003. "Breaking the Conflict Trap : Civil War and Development Policy," World Bank Publications, The World Bank, number 13938, October.
  4. Fosu, A. K., 2001. "Political instability and economic growth in developing economies: some specification empirics," Economics Letters, Elsevier, vol. 70(2), pages 289-294, February.
  5. Paul Collier & Anke Hoeffler, 2002. "Greed and grievance in civil wars," CSAE Working Paper Series 2002-01, Centre for the Study of African Economies, University of Oxford.
  6. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  7. Paul Collier & Anke Hoeffler, 2002. "Greed and Grievance in Civil War," Economics Series Working Papers WPS/2002-01, University of Oxford, Department of Economics.
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Citations

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Cited by:
  1. Mutascu, Mihai & Tiwari, Aviral & Estrada, Fernando, 2011. "Taxation and political stability," MPRA Paper 32272, University Library of Munich, Germany.
  2. Estrada, Fernando & Mutascu, Mihai & Tiwari, Aviral, 2011. "Estabilidad política y tributación
    [Taxation and political stability]
    ," MPRA Paper 32414, University Library of Munich, Germany.
  3. Barry, Boubacar-Sid & Gacitua-Mario, Estanislao & Wodon, Quentin, 2007. "Conflict, Livelihoods, and Poverty in Guinea-Bissau: An Overview," MPRA Paper 11115, University Library of Munich, Germany.
  4. Luděk Kouba, 2009. "The Proposal of Original Classification of Contemporary Social-Economic Approaches to the Growth Theory," Politická ekonomie, University of Economics, Prague, vol. 2009(5), pages 696-713.
  5. Dhaneshwar Ghura & Rina Bhattacharya, 2006. "Oil and Growth in the Republic of Congo," IMF Working Papers 06/185, International Monetary Fund.
  6. Mark Lewis & Jean-Claude Nachega & Said Bakhache & Kadima D. Kalonji, 2006. "Assessing Competitiveness After Conflict," IMF Working Papers 06/303, International Monetary Fund.
  7. Therese F. Azeng & Thierry Yogo Urbain, 2013. "Working Paper 171 - Youth Unemployment and Political Instability in Selected Developing Countries," Working Paper Series 467, African Development Bank.

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