This study investigated the relationship of political instability with the stock prices. Results of the study indicated the negative relationship of stock prices with political instability. Moreover, results of suggested that instable political system ultimately leads decline in stock prices. Inflation has shown negative relationship with stock prices whereas, industrial production and Exports have positive relationship with stock prices.

/pdf/relationship-among-political-instability-stock-market-51wjzxxs9t.pdf

Relationship Among Political Instability, Stock Market Returns and Stock Market Volatility

This paper presents a theoretical model with micro-foundations
 that captures some important features of Pakistan‘s economy which have
 emerged in sixty-four years of its history. A comparison of Pakistan‘s
 economic performance during different regimes shows that macroeconomic
 fundamentals tend to show an improvement during the autocratic regimes
 as compared with those prevailing during democratic regimes. In
 particular, periods of autocratic regimes are typically characterised by
 low inflation, robust growth and low level of bureaucratic corruption
 due to better governance. In contrast, the economic performance during
 the democratic regimes has been observed to worsen with weak governance
 and high levels of corruption, high inflation due partly to reliance on
 seigniorage to finance public spending, and lacklustre growth. Using
 annual data from 1950 to 2011, computational modelling is carried out by
 applying Markov-Regime switching technique with maximum-likelihood
 procedures. The estimation results based on empirical modelling setup
 are supportive of the above stylised-facts and also confirm the
 implications of the theoretical model. JEL classifications: D73, E31,
 H60, O42 Keywords: Political Instability, Governance, Corruption,
 Inflation, Growth

https://www.pide.org.pk/psde/pdf/AGM27/Adnan%20Haider.pdf

Consequences of Political Instability, Governance and Bureaucratic Corruption on Inflation and Growth: The Case of Pakistan.

This paper investigates whether political instability leads to volatile inflation using a panel of 49 African countries. The study uses novel measures of political instability, particularly the state failure index and state fragility index. In the field of political instability and inflation volatility, this is the first study to measure inflation volatility as the conditional variance of inflation estimated from GARCH (1, 1) model. Adopting the system-generalized method of moments estimator for linear dynamic panel models for the sample period 1985-2009, the study documents a positive statistically significant effect of political instability on inflation volatility.

pdf/the-impact-of-political-instability-on-inflation-volatility-1nsmh0qea3.pdf

The Impact of Political Instability on Inflation Volatility in Africa

We analyze which forces explain inflation and how in a large panel of 124 countries from 1997 to 2015. Models motivated by economic theory are compared to an approach based on model-based boosting and non-linearities are explicitly considered. We provide compelling evidence that the interaction of energy price and energy rents stand out among 40 explanatory variables. The output gap and globalization are also relevant drivers of inflation. Credit and money growth, a country's inflation history and demographic changes are comparably less important while central bank related variables as well as political variables turn out to have the least empirical relevance. In a subset of countries public debt denomination and exchange rate arrangements also play a noteworthy role in the inflation process. By contrast, other public-debt variables and an inflation targeting regime have weaker explanatory power. Finally, there is clear evidence of structural breaks in the effects since the financial crisis.

pdf/what-drives-inflation-and-how-evidence-from-additive-mixed-9xp1p013jk.pdf

What Drives Inflation and How: Evidence from Additive Mixed Models Selected by cAIC

Inflation and the Structure of Economic and Political Systems

Using a dynamic panel data approach, we estimate the impact of the political and institutional factors on inflation. Estimation results show that a lower degree of political instability generates lower inflation only for developed and low-inflation countries. However, when political freedom is taken into account, political instability appears to be influential on inflation also for developing countries and turns out to be significant only for high-inflation countries. Such findings emphasize the inflation-reducing effects of political stability depending on democratic political structure.

Political instability, political freedom and inflation

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Political instability, political freedom and inflation