CREDIT 17/03 The economic impact of political instability and mass civil protest

Summary

Over the past few years, the world has witnessed several events of political regime crises and mass civil protests such as the Iranian green revolution in 2009, the Arab Spring uprisings in 2011, and more recently the South Korean mass civil protests in 2016-2017. While previous research has shown that civil and armed conflicts depress economic growth, evidence about the economic impact of such less drastic forms of political instability remains unclear.

In this discussion paper, the authors examine the economic impact of political regime crises and mass civil protests up to a five-year horizon using the Synthetic Control Methodology (SCM) which yields (empirical) estimates not only of the immediate economic impact but also of the cumulative effects for each subsequent year. The essential idea of SCM is to compare the post-crisis economic performance of a country with that of a synthetic (hypothetical) alternative estimated as a weighted average of other countries. The authors' unambiguous finding is that in cases of political regime crises accompanied by mass civil protest, there is typically an immediate fall in output which is never recovered in the subsequent five years, while in political regime crises unaccompanied by protest, there are usually no significant negative economic effects.

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Authors

Samer Matta, Simon Appleton and Michael Bleaney

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