The Macroeconomic Impact of Social Unrest
IMF Working Papers, May 7, 2021
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Bibliographic details
- Authors: Metodij Hadzi-Vaskov, Samuel Pienknagura, Luca A Ricci
- Published: May 7, 2021
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513582573.001
Summary of scope and approach
- Explores the macroeconomic impact of social unrest using a novel index based on news reports.
- Identifies effects on GDP, sectoral activity, demand components, confidence, uncertainty, and heterogeneity by event type and country characteristics.
Main findings
- First key finding:
- GDP remains on average 0.2 percentage points below the pre-shock baseline six quarters after a one-standard deviation increase in the unrest index.
- The decline is driven by sharp contractions in manufacturing and services (sectoral dimension), and consumption (demand dimension).
- Second key finding:
- Unrest lowers confidence and raises uncertainty.
- The adverse effect on GDP can be mitigated by strong institutions and by a country’s policy space.
- Third key finding:
- An unrest “event”, captured by a large change in the unrest index, is associated with a 1 percentage point reduction in GDP six quarters after the event.
- Impacts differ by type of event:
- Episodes motivated by socio-economic reasons result in sharper GDP contractions compared to those associated with politics/elections.
- Events triggered by a combination of socio-economic and political/election factors lead to the sharpest contractions.
Channels and heterogeneity
- Sectoral dimension:
- Manufacturing and services experience sharp contractions following unrest shocks.
- Demand dimension:
- Consumption is a principal channel through which unrest reduces GDP.
- Confidence and uncertainty:
- Unrest episodes lower confidence and raise uncertainty, amplifying macroeconomic effects.
- Mitigating factors:
- Strong institutions and greater policy space are associated with smaller adverse GDP effects from unrest.
- Event types:
- Socio-economic-motivated episodes → sharper GDP contractions.
- Politics/elections-motivated episodes → less sharp contractions.
- Combined-motivation episodes → sharpest contractions.
Robustness and identification
- Results are not driven by countries with adverse growth trajectories prior to unrest events.
- Results are not driven by fiscal consolidations.
- Findings are robust to instrumenting via regional unrest.
Key statistics and publication identifiers
- GDP impact after a one-standard deviation increase in the unrest index: 0.2 percentage points below pre-shock baseline six quarters after the shock.
- GDP impact after a large unrest event: 1 percentage point reduction six quarters after the event.
- Pages: 31
- Volume: 2021
- Issue: 135
- Series: Working Paper No. 2021/135
- DOI: https://doi.org/10.5089/9781513582573.001
- Stock No: WPIEA2021135
- ISBN: 9781513582573
- ISSN: 1018-5941
Source: The Macroeconomic Impact of Social Unrest, Metodij Hadzi-Vaskov, Samuel Pienknagura, and Luca A Ricci, IMF Working Papers 2021, 135 (2021).
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- Working Paper