Both theory and empirical evidence suggest that political instability hinders domestic investment and foreign direct investment, therefore retarding economic growth. Moreover, political instability generates inefficiently high inflation, which hinders investment, reduces welfare and retards economic growth. In Lesotho periods of political instability are associated with very low levels of investment and economic growth. However, there is no evidence to suggest that political instability has led to high levels of inflation in those troubled periods.
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Categories: Journal of African Elections