ABSTRACT
This chapter explores the evidence on the importance of instabilities—economic and political—for development in African countries by reviewing the literature related to growth. It reviews studies that bear on the role of instabilities, specifically political, in the transformation of growth to development. The chapter also reviews the literature on instabilities and development in Africa. It shows that economic instabilities, particularly of investment and imports, tend to reduce economic growth and hence economic development. Two types of instabilities are usually identified: economic and political. "Economic instability" is traditionally associated with high inflationary uncertainty, and hence the usual reference to "stabilization" program to cure an inflationary ill in a country. The PI impact is non-monotonic, however; though negative overall, it can actually be positive at sufficiently low levels of investment. Other forms of political instability (PI) include open conflicts, in the form of armed insurrections such as civil wars, which have been relatively frequent in Africa since the early 1990s.
