Political Instability

Definition
PI (Political Instability) is the unsteadiness in governments, regime changes and the insecurity that the society receives out of these changes in a nation or in a region.

Factors
Corruption

Factors
Growth rate

Factors
Initial income level

Factors
Nature of political regime

Example of a politically unstable country

Myanmar (Burma) member of the Southeast Asian Nations (ASEAN)

Example of a politically unstable country

Myanmar (Burma) still under military rule

Example of a politically unstable country

Myanmar (Burma) although it had its parliamentary elections recently, the military still vastly controls the executive and legislative branches of government

Example of a politically unstable country

Myanmar (Burma) its people do not exercise political freedom

Philippines is
relatively politically stable BECAUSE: its government systems are functioning

Philippines is
relatively politically stable BECAUSE: people are exercising their democratic rights under the constitution

Philippines is
relatively politically stable BECAUSE: the economy is stable

Philippines is
relatively politically stable BECAUSE: the country enjoys the confidence of the international community

Effects to the economy

Political instability is likely to shorten policymakers horizons leading to suboptimal short term macroeconomic policies. Political instability may also lead to a more frequent switch of policies, creating volatility and thus, negatively affecting macroeconomic performance. The profession produced an ample literature documenting the negative effects of political instability on a wide range of macroeconomic variables including, among others, GDP growth, private investment, and inflation. Political instability lowers the economic growth.

Effects to the economy

Political instability generates an uncertain politicoeconomic environment, raising risks and reducing investment. Political instability reduces the tourism industry. Due political instability foreign investors relocate the investment in other countries. Political instability adversely affects tourism, consumer spending and investor confidence.