Working Paper: CEPR ID: DP2555
Authors: Nauro F. Campos; Jeffrey B. Nugent
Abstract: An unstable macroeconomic environment is often regarded as detrimental to economic growth. Among the sources contributing to such instability, the literature has assigned most of the blame to political issues. This paper empirically tests for a causal and negative long-term relationship between political instability and economic growth, but finds no evidence of such a relationship. Sensitivity analysis indicates that there is a contemporaneous negative relationship and that, in the long run and ignoring institutional factors, the Sub-Saharan Africa group plays the determining role in steering this relationship into becoming causal and negative.
Keywords: Economic growth; Political instability
JEL Codes: D72; E23; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Institutional Factors (D02) | Relationship between Political Instability (SPI) and Economic Growth (O17) |
| Political Instability (SPI) (P26) | Economic Growth (O49) |
| Severe Political Instability (SPI) (O17) | Economic Growth (O49) |
| Moderate Political Instability (SPI) (P39) | Economic Growth (O49) |