The impact of political instability on economic growth (Case of Albania)

• Author: Gerta Xhaferi (Gorjani) - Ilija Ilija
• Pages: 99-108

Vol. 3 No. 2

July 2017

ISSN 2410-3918

Acces online at www.iipccl.org

99

Academic Journal of Business, Administration, Law and Social Sciences

IIPCCL Publishing, Graz-Austria

The impact of political instability on economic growth

(Case of Albania)

PhD (C.) Gerta Xhaferi (Gorjani)

MSc Il a Il a

Abstract

The aim of this study is to defi ne the impact of political instability on economic growth.

Considering the multidimensionality of a factor like political instability, the study employs

only four variables to measure it. The variables used to measure political instability are civil

liberties, political rights, number of women in parliament and the government changes during

years. Regarding the economic growth this study employs the variable of real GDP growth

rate as the best factor indicating economic growth. The data are obtained from national and

international sources like “INSTAT”, “Bank of Albania” and “The Global Economy”, and takes

into consideration the period from 1990-2015. According to the literature it was expected to

have a signifi cant negative impact of political instability on economic growth. Through the

results obtained from the econometric model the expectation holds. What is interesting is the

insignifi cance of all explanatory variables beside the variable of civil liberty, which is found

to be highly signifi cant. The analysis reveals that an increase in civil liberties would have a

positive impact on GDP growth rate. The study also concluded that the importance of civil

liberties as a transmission channel of political instability can be justifi ed with the weakness of

the judicial system and the classifi cation of Albania as a partly-free country.

Keywords: Political instability, Economic Growth, Civil Liberties, Political Rights, Woman in

Parliament, Government changes.

Introduction

Over the last 26 years Albania has had a signifi cant political instability. Since the

fall of communist system in year 1991 up to now days, Albania has experienced 12

cabinet changes/government changes. The period from year 1990 up to year 1998

can be considered as the period with the highest level of instability, lowest level of

economic growth and the lowest level of human rights. The fall of communism as

it was expected has been associated with violent demonstrations, civil protest, and

many injured people. The fi rst pluralist elections took place on March 1991, and the

communist party remained into power while the fi rst party created during pluralist

system, the “Democratic party” became the opposition. The result was surprising

but it was justifi ed with the fear and lack of knowledge rooted in the minds of

Albanians from the rough dictatorship. The opposition of that time fought to bring

the communist party down by using any democratic tool. Finally in March 1992

Albania experienced early elections, which brought the opposition into power with

an extraordinary support from the people, and le the communists powerless in

opposition.

The period a er 1992 elections witnessed the real starting of democracy in Albania.