Investment and Instability

Nauro Campos and Jeffrey Nugent

Development and Comp Systems from University Library of Munich, Germany

Abstract: Although recet research has repeatedly found a negative association between investment and socio-political instability (SPI), the existence and direction of causality between these two variables has not yet been investigated. We construct an index of SPI for non-overlaping five-years periods between 1960 and 1995 for a sample of 98 developing countries. We use the Granger causality framework and report Anderson-Hsiao- Arellano instrumental variable estimates. Our main finding is that, for the full sample, there is a robust causal relationship going from SPI to investment, and it is positive. In other words, we find three reasons may explain this result: one is that SPI delays investment, another is that it destroys at least part of the capital stock, and the third is that SPI causes changes in government and in government policies that are benefical in the long run.

Keywords: Political instability; Aggregate investment; Granger causality (search for similar items in EconPapers)
JEL-codes: D72 E23 O40 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2001-02-23
Note: Type of Document - Acrobat PDF; pages: 19 ; figures: included
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/dev/papers/0012/0012015.pdf (application/pdf)

Related works:
Working Paper: Investment and Instability (2000)
Working Paper: Investment and Instability (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpdc:0012015

Access Statistics for this paper

More papers in Development and Comp Systems from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).