| Summary: | In this study, we try to analyze the
causal relationship between political instability and macroeconomic variables
for selected emerging markets such as Turkey, India, Russia, Mexico and
Indonesia by using panel bootstrap causality tests over the period of 1992 and
2016. Selected macroeconomic variables are growth, inflation and exchange rate.
Even though the results of the study differ across nations in the panel and not
indicating to many causal relations, they provide the evidences of causal
relations between political instability and some macroeconomic variables.
Although it is hard to generalize the major findings of the study to all
countries in the sample, still we can conclude that unlike the expectations,
changes in most of the macroeconomic variables do cause in changes in political
instability. Thus, achieving economic stability in terms of low inflation, high
growth and stable exchange rate seem to be key factors to achieve political
stability.
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