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Does Political Instability Lead to Higher Inflation? A Panel Data Analysis
Author:
Mr. Ari Aisen
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and
Mr. Francisco José Veiga null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2005: Issue 049
Language:
English
Publication Date:
01 Mar 2005
DOI:
https://doi.org/10.5089/9781451860689.001
ISBN:
9781451860689
ISSN:
1018-5941
Pages:
15
Keywords:
WP; government crisis; government; country
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund