The Macroeconomic Impact of Social Unrest

Metodij Hadzi-Vaskov, Samuel Pienknagura and Luca Ricci

The B.E. Journal of Macroeconomics, 2023, vol. 23, issue 2, 917-958

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).

Keywords: social unrest; economic activity; growth; institutions; policy space (search for similar items in EconPapers)
JEL-codes: D74 F50 O11 O47 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Working Paper: The Macroeconomic Impact of Social Unrest (2021)
Working Paper: The Macroeconomic Impact of Social Unrest (2021)
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DOI: 10.1515/bejm-2022-0039

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