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Political instability and economic vulnerability
Author(s) -
Bussière Matthieu,
Mulder Christian
Publication year - 2000
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/1099-1158(200010)5:4<309::aid-ijfe136>3.0.co;2-i
Subject(s) - vulnerability (computing) , political instability , economics , politics , context (archaeology) , economic stability , predictive power , instability , development economics , power (physics) , economic system , macroeconomics , political science , geography , law , philosophy , archaeology , epistemology , quantum mechanics , physics , computer security , computer science , mechanics
This paper analyzes and tests the influence of political instability on economic vulnerability in the context of the 1994 and 1997 crisis 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. Copyright © 2000 John Wiley & Sons, Ltd.