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The Dynamic Effect of Social and Political Instability on Output

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Author Info

  • Lorenzo E. Bernal-Verdugo
  • Davide Furceri
  • Dominique M. Guillaume

Abstract

The aim of this paper is to analyze the dynamic effect of social and political instability on output. Using a panel of up to 183 countries from 1980 to 2010, the results of the paper suggest that social conflicts have a significant and negative impact on output in the short-term with the magnitude of the effect being a function of the intensity of political instability. The results also show that the recovery of output over the medium-term depends on the ability of the country to implement, in the aftermath of a social instability episode, reforms aimed at improving the level of governance. The results are robust to different checks and estimation strategies.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/91.

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Length: 41
Date of creation: 23 Apr 2013
Date of revision:
Handle: RePEc:imf:imfwpa:13/91

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Related research

Keywords: Political economy; Fiscal reforms; Economic growth; Economic models; social conflicts; crisis; governance; social instability; political instability; governance indicator; governance indicators; governance reforms; guerrilla warfare; quality of governance; effect of governance; measure of governance; levels of governance; worldwide governance indicators; governance data;

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References

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  1. Davide Furceri & Aleksandra Zdzienicka, 2010. "The Consequences of Banking Crises for Public Debt," OECD Economics Department Working Papers 801, OECD Publishing.
  2. Jong-A-Pin, R., 2006. "On the measurement of political instability and its impact on economic growth," Research Report 06C05, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  3. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, American Economic Association, vol. 94(4), pages 813-835, September.
  4. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, Elsevier, vol. 40(6), pages 1203-1228, June.
  5. Ari Aisen & Francisco José Veiga, 2010. "How does political instability affect economic growth?," Working Papers Central Bank of Chile, Central Bank of Chile 568, Central Bank of Chile.
  6. Rodrik, Dani, 1991. "Policy uncertainty and private investment in developing countries," Journal of Development Economics, Elsevier, Elsevier, vol. 36(2), pages 229-242, October.
  7. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, Econometric Society, vol. 49(6), pages 1417-26, November.
  8. Romain Bouis & Romain Duval, 2011. "Raising Potential Growth After the Crisis: A Quantitative Assessment of the Potential Gains from Various Structural Reforms in the OECD Area and Beyond," OECD Economics Department Working Papers 835, OECD Publishing.
  9. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, StataCorp LP, vol. 9(1), pages 86-136, March.
  10. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
  11. Òscar Jordà, 2005. "Estimation and Inference of Impulse Responses by Local Projections," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 161-182, March.
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Cited by:
  1. MORIKAWA Masayuki, 2013. "What Type of Policy Uncertainty Matters for Business?," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 13076, Research Institute of Economy, Trade and Industry (RIETI).

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