Political Instability and Economic Vulnerability

Christian Mulder () and Matthieu Bussiere

No 1999/046, IMF Working Papers from International Monetary Fund

Abstract: This paper analyzes and tests the influence of political instability on economic vulnerability in the context of the 1994 and 1997 crises episodes. It constructs four political variables that aim at quantifying political instability. The paper finds that for countries with weak economic fundamentals and low reserves, political instability has a strong impact on economic vulnerability. The estimation results suggest that including political variables in economic models does improve their power to explain and predict economic crises. The paper concludes that countries are more economically vulnerable during and especially following election periods, and when election results are less stable than at other times.

Keywords: WP; country; government; variable; vulnerability indicators; political cycle; economic crises; emerging markets; government policy; presidential election; country rating agency; election variable; ZANU-PF party; government effectiveness; multi-party regime; government coalition; election outcome; countries data; Real exchange rates; Exchange rate arrangements; Exchange rates; Non-renewable resources; Africa (search for similar items in EconPapers)
Pages: 36
Date: 1999-04-01
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Citations: View citations in EconPapers (36)

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Journal Article: Political Instability and Economic Vulnerability (2000)
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