Political Instability and Economic Vulnerability

IMF Working Paper No. WP/99/46

36 Pages Posted: 22 May 2005

See all articles by Matthieu Bussière

Matthieu Bussière

Banque de France

Christian Mulder

International Monetary Fund (IMF) - Policy Development and Review Department

Date Written: April 1999

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: Vulnerability indicators, political cycle, economic crises, emerging markets

JEL Classification: F31, F47, H8

Suggested Citation

Bussiere, Matthieu and Mulder, Christian, Political Instability and Economic Vulnerability (April 1999). IMF Working Paper No. WP/99/46, Available at SSRN: https://ssrn.com/abstract=727423 or http://dx.doi.org/10.2139/ssrn.727423

Matthieu Bussiere (Contact Author)

Banque de France ( email )

Paris
France

Christian Mulder

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

700 19th St. NW
Washington, DC 20431
United States

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