Investment and Instability

Nauro Campos and Jeffrey Nugent

No 2609, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Although recent research has repeatedly found a negative association between investment and political instability, the existence and direction of causality between these two variables has not yet been investigated. This Paper empirically tests for such a causal and negative long-run relationship between political instability and investment. It finds that there is a robust causal relationship from instability to investment, and that it is positive. In other words, an increase in political instability causes an increase in investment (Granger). We identify three different theories that can explain this result.

Keywords: Granger causality; Political instability; Aggregate investment (search for similar items in EconPapers)
JEL-codes: D72 E23 O40 (search for similar items in EconPapers)
Date: 2000-11
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Citations: View citations in EconPapers (4)

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