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The Macroeconomic Impact of Social Unrest

  • Metodij Hadzi-Vaskov , Samuel Pienknagura EMAIL logo and Luca Antonio Ricci
Published/Copyright: January 26, 2023
The B.E. Journal of Macroeconomics
From the journal The B.E. Journal of Macroeconomics Volume 23 Issue 2

Abstract

This paper explores the macroeconomic impact of social unrest, using a novel index based on news reports. It shows that unrest has an adverse effect on economic activity, with GDP remaining on average 0.2 percent below the pre-unrest baseline six quarters after a one-standard deviation increase in the unrest index. Moreover, results are robust to instrumenting via regional unrest to address potential endogeneity concerns. Unrest “events”, captured by a large change in the unrest index, result in a more pronounced decline in GDP—a 1 percent reduction six quarters after the event—but impacts differ by type of event. The adverse impact of unrest on activity is mainly associated with sharp contractions in manufacturing and services, and consumption. However, it can be mitigated by strong institutions and by a country’s policy space (such as fiscal space and exchange rate flexibility).

Keywords: social unrest; economic activity; growth; institutions; policy space
JEL Classification: D74; F50; O11; O47
Corresponding author: Samuel Pienknagura, International Monetary Fund, Washington, USA, E-mail:

We thank the editor, Tiago Cavalcanti, and two anonymous referees for excellent suggestions. We are very grateful to Philip Barrett for kindly sharing the social unrest data and for valuable comments. The paper also benefitted from helpful comments by Oded Galor, Elena Ianchovichina, Deniz Igan, Aart Kraay, Inci Otker, Martin Rama, Daniel Riera-Crichton, Bob Rijkers, Guillermo Vuletin, and participants at the IMF WHD Seminar, the World Bank ABCDE Conference, and the World Bank LAC Chief Economist Office Seminar. The views expressed in this paper are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. All errros are our own.

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Supplementary Material

This article contains supplementary material (https://doi.org/10.1515/bejm-2022-0039).

Received: 2022-02-18
Accepted: 2023-01-01
Published Online: 2023-01-26

© 2023 Walter de Gruyter GmbH, Berlin/Boston

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  2. Advances
  3. The Macroeconomic Impact of the 1918–19 Influenza Pandemic in Sweden
  4. Aggregate Costs of a Gender Gap in the Access to Business Resources
  5. The Macroeconomic Effects of Shadow Banking Panics
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  9. Progressive Taxation and Robust Monetary Policy
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https://doi.org/10.1515/bejm-2022-0039
Keywords for this article
social unrest; economic activity; growth; institutions; policy space

Articles in the same Issue

  1. Frontmatter
  2. Advances
  3. The Macroeconomic Impact of the 1918–19 Influenza Pandemic in Sweden
  4. Aggregate Costs of a Gender Gap in the Access to Business Resources
  5. The Macroeconomic Effects of Shadow Banking Panics
  6. Wealth Inequality and the Exploration of Novel Technologies
  7. Contributions
  8. Learning, Central Bank Conservatism, and Stock Price Dynamics
  9. Progressive Taxation and Robust Monetary Policy
  10. The New Keynesian Phillips Curve and Imperfect Exchange Rate Pass-Through
  11. The Macroeconomic Impact of Social Unrest
  12. Interest Rates, Money, and Fed Monetary Policy in a Markov-Switching Bayesian VAR
  13. Un-Incorporation and Conditional Misallocation: Firm-Level Evidence from Sri Lanka
  14. Idiosyncratic Shocks, Lumpy Investment and the Monetary Transmission Mechanism
  15. Open Economy Neoclassical Growth Models and the Role of Life Expectancy
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