Political Instability and Economic Vulnerability

By Christian B. Mulder, Matthieu Bussière

April 1, 1999

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Format: Chicago

Christian B. Mulder, and Matthieu Bussière. Political Instability and Economic Vulnerability, (USA: International Monetary Fund, 1999) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Environment, Exchange rate arrangements, Exchange rates, Financial crises, Foreign exchange, Non-renewable resources, Real exchange rates

Keywords: Africa, Countries data, Country, Country rating agency, Economic crises, Election outcome, Election variable, Emerging markets, Exchange rate arrangements, Exchange rates, Government, Government coalition, Government effectiveness, Government policy, Multi-party regime, Non-renewable resources, Political cycle, Presidential election, Real exchange rates, Variable, Vulnerability indicators, WP, ZANU-PF party

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/046
Stock No:

WPIEA0461999
ISBN:

9781451846539
ISSN:

1018-5941

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