Who is afraid of political instability?

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An unstable macroeconomic environment is often regarded as detrimental to economic growth. Among the sources contributing to such instability, much of the blame has been assigned to political issues. This paper empirically tests for a causal and negative long-run relation between political instability and economic growth but finds no evidence of such a relationship. Sensitivity analysis indicates that there is a contemporaneous negative relationship but also that, in the long run and ignoring institutional factors, the group of African countries plays the determining role.


Economic growth
Political instability
Granger causality

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