The Macroeconomic Impact of Social Unrest

This paper explores the macroeconomic impact of social unrest, using a novel index based on news reports. The findings are threefold. First, unrest has an adverse effect economic activity, with GDP remaining average 0.2 percentage points below pre-shock baseline six quarters after one-standard deviation increase in index. is driven by sharp contractions manufacturing and services (sectoral dimension), consumption (demand dimension). Second, lowers confidence raises uncertainty; however, its can be mitigated strong institutions country’s policy space. Third, “event”, which captured large change index, associated 1 point reduction event. Impacts differ type event: episodes motivated socio-economic reasons result sharper compared to those politics/elections, events triggered combination both factors lead sharpest contractions. Results not countries growth trajectories prior or fiscal consolidations, robust instrumenting via regional unrest.