Socio-political instability and growth dynamics

We develop an overlapping generations (OLG) monetary endogenous growth model characterized by socio-political instability, with the latter being specified as a fraction of output lost due to strikes, riots and protests. show that dynamics arise in this when instability is function inflation. In particular, two distinct emerge, one convergent other divergent contingent on strength response Since our theoretical results hinge inflation, we test prediction inflation affects positively using panel 156 countries for 1980–2012 period, allowing country time fixed effects. The indicate relates instability. Policy makers should be cognisant it crucial maintain long-run price stability, failure do so may result high emanating from excessive money supply growth, leading (er) ultimately, economy balanced path.