The Dynamic Effect of Social and Political Instability on Output: The Role of Reforms

42 Pages Posted: 11 May 2013

See all articles by Lorenzo E. Bernal-Verdugo

Lorenzo E. Bernal-Verdugo

University of Chicago - Booth School of Business - Economics

Davide Furceri

International Monetary Fund (IMF)

Dominique M. Guillaume

Catholic University of Leuven

Date Written: April 2013

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.

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

JEL Classification: E29, J60, E32, D70

Suggested Citation

Bernal-Verdugo, Lorenzo E. and Furceri, Davide and Guillaume, Dominique M., The Dynamic Effect of Social and Political Instability on Output: The Role of Reforms (April 2013). IMF Working Paper No. 13/91. Available at SSRN: https://ssrn.com/abstract=2263603

Lorenzo E. Bernal-Verdugo (Contact Author)

University of Chicago - Booth School of Business - Economics ( email )

Graduate School of Business
1101 East 58th Street
Chicago, IL 60637
United States

Davide Furceri

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Dominique M. Guillaume

Catholic University of Leuven ( email )

Oude Markt 13
Center for Economic Studies
B-3000 Leuven
Belgium
32 16 32 68 40 (Phone)
32 16 32 67 (Fax)

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