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Nigeria Journal of Management Sciences (NJMS), Benue State University

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Political Instability-Development Nexus: Empirical evidence from a small open economy

Owen Affor Maku
Department of Economics, Delta State University, Abraka E-mail: makuowen@gmail.com; makuaffor@delsu.edu.ng

Abstract

The uncertainties connected with an unstable political environment may induce negative returns to investment and acceleration of development process. One important theoretical argument essential to this relationship is built on the outcome of uncertainty on productive economic decisions such as production and investment. In analyzing the relationship existing between political instability and economic development, the time-series analytical technique was adopted covering the period of 22 years (1996-2017). The Ordinary Least Square (OLS) technique was adopted, alongside other preliminary test; the unit root and Johansen cointegration test analysis. Thereafter, the Error Correction Method (ECM) was adopted to ascertain the long run relationship. Empirical result revealed that political stability and absence of terrorism showed a negative and significant relationship to real gross domestic product. It is thus recommended that for developing economies to be able to escape this cycle, making the necessary reforms in institutional structure and adapting policies of their own is a necessity confronting them.

Keywords: Political Instability, Development, Environment, Institution Quality, Nigeria

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