Does Political Instability Lead to Higher Inflation? A Panel Data Analysis
By A. Aisen, Francisco Veiga. Social Science Research Network, 2005
278 citations recorded by the source corpus.
Economists generally accept the proposition that high inflation rates generate inefficiencies that reduce society's welfare and economic growth. However, determining the causes of the worldwide diversity of inflationary experiences is an important challenge not yet satisfactorily confronted by the profession. Based on a dataset covering around 100 countries for the period 1960–99 and using modern panel data econometric techniques to control for endogeneity, this paper shows that a higher degree of political instability is associated with higher inflation. The paper also draws relevant policy implications for the optimal design of inflation stabilization programs and of the institutions favorable to price stability.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/d67cee67375a69b874da8d8e02a3fe2689b96d31
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In Economics and Econometrics
Citations in the corpus
- Revolution empirics: predicting the Arab Spring (2015, unknown): “There is also a general consensus among economists that high inflation could generate inefficiencies that eventually lead to social unrest due to reduction in economic growth and general social welfare (Aisen & Veiga, 2006).”
- Fiscal Policy and Financial Markets (2008, unknown): “It has also been shown that a higher degree of political instability is associated with higher inflation (e.g., Aisen and Veiga, 2005).”
- How Does Political Instability Affect Economic Growth? (2010, methodology): “As regards to private investment, Alesina and Perotti (1996) show that socio-political instability generates an uncertain politico-economic environment, raising risks and reducing investment.”