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The Macroeconomic Impact of Social Unrest

Author

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  • Hadzi-Vaskov Metodij

    (International Monetary Fund, Washington, USA)

  • Pienknagura Samuel

    (International Monetary Fund, Washington, USA)

  • Ricci Luca Antonio

    (International Monetary Fund, Washington, USA)

Abstract

This paper explores the macroeconomic impact of social unrest, using a novel index based on news reports. It shows that unrest has an adverse effect on economic activity, with GDP remaining on average 0.2 percent below the pre-unrest baseline six quarters after a one-standard deviation increase in the unrest index. Moreover, results are robust to instrumenting via regional unrest to address potential endogeneity concerns. Unrest “events”, captured by a large change in the unrest index, result in a more pronounced decline in GDP—a 1 percent reduction six quarters after the event—but impacts differ by type of event. The adverse impact of unrest on activity is mainly associated with sharp contractions in manufacturing and services, and consumption. However, it can be mitigated by strong institutions and by a country’s policy space (such as fiscal space and exchange rate flexibility).

Suggested Citation

  • Hadzi-Vaskov Metodij & Pienknagura Samuel & Ricci Luca Antonio, 2023. "The Macroeconomic Impact of Social Unrest," The B.E. Journal of Macroeconomics, De Gruyter, vol. 23(2), pages 917-958, June.
    • Handle: RePEc:bpj:bejmac:v:23:y:2023:i:2:p:917-958:n:4
    DOI: 10.1515/bejm-2022-0039
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    Cited by:

    1. Metodij Hadzi-Vaskov & Mr. Luca A Ricci, 2021. "Understanding Chile’s Social Unrest in an International Perspective," IMF Working Papers 2021/174, International Monetary Fund.
    2. Lucas Rosso & Rodrigo Wagner, 2024. "How much does mobility matter for value-added tax revenue? Cross-country evidence around COVID-19," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 841-855, June.
    3. Diakonova, Marina & Molina, Luis & Mueller, Hannes & Pérez, Javier J. & Rauh, Christopher, 2024. "The information content of conflict, social unrest and policy uncertainty measures for macroeconomic forecasting," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 5(4).
    4. Tahsin Saadi Sedik & Rui Xu, 2020. "A Vicious Cycle: How Pandemics Lead to Economic Despair and Social Unrest," IMF Working Papers 2020/216, International Monetary Fund.
    5. Philip Barrett & Mariia Bondar & Sophia Chen & Mali Chivakul & Deniz Igan, 2024. "Pricing protest: the response of financial markets to social unrest," Review of Finance, European Finance Association, vol. 28(4), pages 1419-1450.
    6. Stergios Skaperdas & Samarth Vaidya, 2025. "Guns, Lawyers, and Markets: On Economic and Political Consequences of Costly Conflict," CESifo Working Paper Series 12135, CESifo.
    7. Francová, Olga & Korhonen, Kari & Kovačević, Dušan, 2023. "Quality of life: A way to buttress crisis program evaluations?," Evaluation and Program Planning, Elsevier, vol. 99(C).
    8. Diakonova, Marina & Ghirelli, Corinna & Molina, Luis & Pérez, Javier J., 2023. "The economic impact of conflict-related and policy uncertainty shocks: The case of Russia," International Economics, Elsevier, vol. 174(C), pages 69-90.

    More about this item

    Keywords

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    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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