Does Political Instability affect Inflation?Tools Khan, Isma (2017) Does Political Instability affect Inflation? [Dissertation (University of Nottingham only)]
AbstractThis research work aimed at examining the relationship between inflation and political instability as well as to determine the institutional, political and economical determinant of inflation volatility. 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 professionals. Based on a dataset covering around 50 countries which were grouped into developed countries, developing countries, oil producing countries and non-oil producing countries for the period 2000-2012 and using GMM technique to control for endogeneity; this paper shows that there is strong positive relationship between political instability and inflation and that the relationship is stronger and significant for developing as well as oil-producing countries. The results of the study have also estimated that higher extent of political instability is linked up with lesser economic growth. The paper also draws relevant policy implications for the optimal design of inflation stabilization programs.
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