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The impact of political instability on economic growth: the case of Guyana

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  • Pasha, Sukrishnalall

Abstract

This paper empirically probes the nexus between political instability and economic growth in Guyana using time-series data covering the period 1961 – 2018 and GARCH (1,1) models. The results show that changes in the Head of State (HOS) exert a positive and significant impact on real GDP growth rates, while strikes have the opposite effect on economic growth. Other proxies of political instability, such as political assassinations, riots, insurrection, and terrorism, are not significantly related to growth in real GDP because of the dispersed nature of economic activities and their negligible effect on production and productivity. When the proxies of political instability are added to the conditional variance equation, the results indicate that only changes in Head of State (HOS) moderate volatility in growth rates. This is probably due to transitory goodwill enjoyed by the incoming Head of State that serves to dampen ethnic tensions, reducing instability. The latter result indicates the importance of democratic turnover.

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  • Pasha, Sukrishnalall, 2020. "The impact of political instability on economic growth: the case of Guyana," MPRA Paper 103145, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:103145
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    Cited by:

    1. Khemraj, Tarron & Pasha, Sukrishnalall, 2024. "Structural change and sectoral interconnectedness in two resource-abundant economies," Resources Policy, Elsevier, vol. 88(C).
    2. Collin Constantine, 2022. "Income Inequality in Guyana: Class or Ethnicity? New Evidence from Survey Data," Working Papers 631, ECINEQ, Society for the Study of Economic Inequality.
    3. Esra Soyu Yıldırım & Cuma Demirtaş & Munise Ilıkkan Özgür, 2022. "Causality Relationship Between Economic, Financial, Political Risk and Growth: The Case of Turkey," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 9(1), pages 165-186, January.

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    More about this item

    Keywords

    Economic growth; GARCH (1; 1); Guyana; political instability;
    All these keywords.

    JEL classification:

    • 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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