The influence of political regime vs political instability on real output: Evidence from the MENA region

Purpose: The purpose of this paper is to empirically compare and contrast the effect of the nature of the political regime vs the political instability (PI) on real output in a group of countries from the Middle East and North Africa (MENA) during the period 1980-2011. This part of the world has been going through a series of unstable political regimes and continuous PI events for over seven decades. Design/methodology/approach: The author employs a time-series cross-sectional Prais-Winsten regression model with panel-corrected standard errors. Findings: The author concludes that the relationship between the nature of the political regime and real output is mixed (negative and positive); this impact seems to get changed to a positive value whenever the regimes’ instability events are mitigated. However, the influence of PI on real output has a negative benchmark level. The author also notices that the effect of the political regime on real output is stronger over all the sample countries of the study. The results depart somehow from the previous studies’ findings. Therefore, the implication of the author’s conclusion is to investigate how and why the effects of these uncertainties turned positive. Originality/value: The paper contributes to the literature from three perspectives. First, the author compares the effects on real output from different types of political system uncertainties. Second, the author extracts evidence on this topic from the most unstable region of the world, the MENA region. Third, the author uses a new econometric technique compared to the previous studies.