The impact of political instability on inflation volatility: The case of the Middle East and North Africa region

Figures & data

Table 1. Summary of the PI indicators

Aisen and Veiga (2006)	Aisen and Veiga (2008)	Barugahara (2015)*	Khan et al. (2011)	Qureshi et al. (2010)
1. Cabinetchanges 2. Governmentcrises 3. Index ofeconomicfreedom 4. Polity scale	1. Index 1 -Assassinations -Cabinet changes -Constitutional changes -Coups -Executive changes -Government crises -Revolutions.	1. State failureindex - Ethnic wars - Revolutionarywars, - Genocides.	1. Polity scale 2. Governmentcrisis 3. Cabinetchanges	1. General strikes 2. Demonstrations 3. Riots 4. Governmentlongevity 5. Governmentchange 6. War 7. Regime type
	2. Index 2 -Assassinations -Constitutional changes -Coups -Government crises -Revolutions	2. Fragility index - effectiveness and legitimacy scores for each country in four dimensions: political, economic, social, and security
	3. Index 3 -Cabinet changes -Executive changes -Government crises.	3. Incidence of coup d’Etat -Success coup - Trail but not succeeded - Plotted coup - Alleged coup

Note: *Used PCA for the first index only.

Table 2. KMO and bartlett’s test

Kaiser–Meyer–Olkin measure of sampling adequacy
Bartlett’s Test of Sphericity
	Approx. Chi-Square	764.578
	Df	120
	Sig.	.000

Figure 1. Scree plot.

Table 3. Factor-loading matrix and unique variances estimates

Factors
	Instability of the political regime	War	Government instability	Aggression (1)	Aggression (2)	Unique Variance
Riots	.834	.131	.092	−.041	.277	0.20
Successful Coups	.588	.003	−.101	.087	−.104	0.63
Number of Major Constitutional Changes	.511	−.064	.078	.052	−.067	0.72
Guerrilla Warfare	.100	.846	−.022	.057	−.127	0.25
ethnic warfare	−.032	.713	.022	.038	.119	0.47
Number of Major Cabinet Changes	.012	−.103	.920	.012	−.072	0.14
Changes in Effective Executive	.278	.056	.448	.009	−.167	0.69
Number of Legislative Elections	−.078	.041	.411	.033	.068	0.82
Assassinations	−.090	.189	−.048	.717	−.015	0.44
Government Crises	−.006	.063	.141	.579	.044	0.64
Revolutions	.197	−.171	−.013	.413	.042	0.76
Anti-Government Demonstrations	.604	.016	.165	−.077	.643	0.19
Alleged Coup	−.032	.000	−.026	.043	.348	0.88

Extraction Method: Maximum Likelihood.

Rotation Method: Oblimin with Kaiser Normalization.

Table 4. Descriptive statistics of the selected monthly inflations by country

	Mean	Median	Std. Dev	Skew	Kurt.	Lag^1	Unit root test		Normality test		Heteroscedasticity^4
							ADF^2	p-value	JB^3	p-value	F-test	p-value
Algeria	0.391	0.455	0.885	−0.022	2.846	4	−9.880	0.000***	0.166	0.920	4.597	0.034**
Bahrain	0.251	0.255	0.663	−1.197	8.480	3	−12.203	0.000***	233.300	0.000***	4.336	0.001***
Djibouti	0.261	0.338	0.930	−0.590	6.903	5	−4.678	0.000***	108.638	0.000***	7.951	0.005***
Egypt	0.996	0.990	1.143	0.171	2.902	1	−7.670	0.000***	16.056	0.000***	3.608	0.059*
Iran	1.450	1.217	1.197	1.631	6.707	3	−3.037	0.034**	158.262	0.000***	18.079	0.000***
Iraq	0.274	0.177	0.926	0.582	4.574	12	−3.845	0.017**	24.911	0.000***	17.186	0.000***
Israel	0.120	0.101	0.412	0.224	3.363	17	−4.430	0.003**	2.154	0.341	2.123	0.027**
Jordan	0.304	0.260	0.828	1.619	18.40	10	−9.392	0.000***	1618.900	0.000***	0.053	0.818
Kuwait	0.306	0.171	0.459	1.539	6.627	10	−3.761	0.021**	146.480	0.000***	4.451	0.037**
Morocco	0.126	0.148	0.609	−0.005	3.302	4	−10.647	0.000***	4.217	0.121	26.961	0.000***
Oman	0.248	0.171	0.456	0.812	3.793	4	−6.185	0.000***	21.550	0.000***	7.043	0.009***
Saudi Arabia	0.273	0.184	0.517	3.211	22.12	1	−10.344	0.000***	2655.700	0.000***	0.332	0.566
Tunisia	0.364	0.356	0.298	−0.026	2.883	2	−6.101	0.000***	0.106	0.948	0.047	0.829
United Arab Emirates	0.238	0.113	0.753	6.697	65.08	0	−10.643	0.000***	26365.5	0.000***	4.285	0.040**

1. The optimal lag length obtained from the standard VAR model, based on Akaike information criterion. 2. ADF denotes coefficient of augmented Dickey-Fuller unit-root test performed with every country optimal lag. 3. JB denotes coefficient of Jarque-Bera of normality. 4. Based on ARCH test (Squared Lagged Residuals)* Statistical significance at 1% level.** Statistical significance at 5% level.*** Statistical significance at 10% level.

Table 5. An overview of three country-specific conditional variance specifications and the best fitted model

	GARCH (1,1)				TGARCH (1,1)				EGARCH (1,1)
	AIC^1 SC^2	ARCH^3 F-test P-value	Q^2(12)^4 Q-stat P-value	JB^5	AIC SC	ARCH F-test P-value	Q^2 (12) Q-stat P-value	JB	AIC SC	ARCH F-test P-value	Q^2(12) Q-stat P-value	JB
Algeria	2.633 2.731	0.191 0.662	10.29 0.590	0.488 0.784	2.607 2.724	0.657 0.418	15.224 0.229	0.639 0.726	2.653 2.771	0.1702 0.6805	7.085 0.852	0.152 0.926
Bahrain	2.012 2.110	0.083 0.772	2.526 0.998	185.09	2.037 2.154	0.754 0.098	2.335 0.999	187.75	2.021 2.139	0.1895 0.6635	4.3811 0.976	136.906
Djibouti	2.415 2.513	0.382 0.537	6.776 0.872	11.253	2.399 2.516	0.4491 0.5038	5.934 0.919	23.795	2.382 2.500	0.8612 0.3548	6.819 0.869	18.983
Egypt	2.617 2.715	1.336 0.249	13.24 0.352	8.060 .017	2.704 2.821	3.5E07 0.9995	7.782 0.802	13.905	2.734 2.832	3.86E–05 0.995	8.880 0.713	13.23
Iran	2.655 2.753	0.190 0.663	13.83 0.312	38.211	2.562 2.679	0.0296 0.8635	8.003 0.785	12.580	2.666 2.764	0.0033 0.9538	19.377 0.080	15.0537
Iraq	2.475 2.573	0.9099 0.3416	12.22 0.428	7.8797	2.4609 2.5782	1.6328 0.2032	13.582 0.328	10.268	2.439 2.5570	1.2584 0.2637	14.307 0.282	14.84
Israel	0.9895 1.0873	0.0052 0.9423	11.97 0.152	0.5517 0.578	0.9156 1.0329	2.9335 0.0888	9.9900 0.125	0.086 0.957	0.9891 1.0869	0.0156 0.9005	11.767 0.162	1.429 0.489
Jordan	2.389 2.487	0.1385 0.7102	2.4365 0.998	920.19	2.3730 2.4904	0.0762 0.7828	3.269 0.993	742.66	2.397 2.495	0.0990 0.7534	9.8391 0.364	840.6
Kuwait	1.0757 1.1734	0.0052 0.9421	10.427 0.236	34.680	1.068 1.186	0.1548 0.6944	12.365 0.136	27.888	1.061 1.159	0.0034 0.9530	10.013 0.264	32.368
Morocco	1.6817 1.7795	0.0172 0.8958	15.746 0.203	1.622 0.444	1.694 1.811	0.0185 0.8918	15.7 0.204	1.558 0.458	1.678 1.796	3.9E–05 0.9950	13.609 0.326	0.1512 0.927
Oman	1.1551 1.2528	0.3940 0.5311	8.4371 0.750	5.621 0.601	1.102 1.220	1.1913 0.2768	4.5013 0.973	5.915 0.051	1.1381 1.2359	0.1814 0.6708	8.0915 0.778	4.474 0.107
Saudi Arabia	1.3881 1.4858	0.5452 0.4614	2.3024 0.999	595.40	1.0714 1.1887	0.1974 0.6574	5.0026 0.958	111.65	1.2096 1.3269	7.6E–05 0.9930	3.5748 0.990	160.912
Tunisia	0.4514 0.5491	0.0032 0.9546	11.464 0.177	0.2906 0.8647	0.4165 0.5338	0.2756 0.6003	11.689 0.166	0.5253 0. 7687	0.4514 0.5491	0.00324 0.9546	11.464 0.177	0.2906 0.864
UAE	2.2099 2.3076	0.0070 0.9332	0.2154 1.000	27347.11	2.1708 2.2881	0.0048 0.9446	0.1842 1.000	28771.0	1.4713 1.5886	0.0900 0.7646	1.3143 1.000	235.622

1. Akaike info criterion; 2. Schwarz criterion; 3. ARCH(LM) heteroscedasticity test; 4. Q2 (12) stat is the value of the serial correlation test (Correlogram of Standardized Residuals Squared) for lag (12). 5. JB is Jarque-Bera coefficient for residuals normality.

Table 6. Summary statistics for key variables

Key variable	Obs.	Mean	Std.Dev.	Min.	Max.
IV	182	.5150494	.5570621	.0193857	4.808562
Inflation	182	5.12236	6.767664	−10.06749	53.23096
Region instability	182	−1.65e-06	1	−.9646	9.03138
War	182	1.48e-06	.9999997	−.93254	7.5968
Government instability	182	4.95e-07	.9999997	−.97002	3.96491
Aggression (1)	182	9.34e-07	.9999998	−1.07905	9.11597
Aggression (2)	182	1.39e-18	.9999998	−3.05457	6.75257
Polity scale	182	−3.472527	5.306809	−10	7
GDP	182	4.285198	.388239	3.613203	4.980813
Agriculture	182	4.873714	4.412221	.160021	13.86911
Trade	182	105.4626	61.14154	30.24655	347.9965
Board money	182	3.440943	3.350476	0	16.47424

Table 7. Correlation matrix

Key variable	IV	l. IV	Inflation	Region instability	War	Government instability	Aggression (1)	Aggression (2)	Polity	GDP	Agriculture	Trade	Broad money
IV	1.0000
l. IV	0.4493	1.0000
Inflation	0.3562	0.2948	1.0000
Region Instability	0.0955	0.0506	0.0998	1.0000
War	0.0389	0.0622	−0.0793	0.0000	1.0000
Government Instability	−0.096	−0.108	−0.0565	0.0000	−0.000	1.0000
Aggression (1)	0.1120	0.1661	0.3997	0.0000	−0.000	−0.000	1.0000
Aggression (2)	−0.090	−0.070	0.0332	0.0000	−0.000	−0.000	−0.000	1.0000
Polity scale	0.0735	0.1017	−0.1268	−0.061	0.3725	0.2095	0.0435	−0.015	1.0000
GDP	−0.326	−0.338	−0.1330	−0.112	−0.064	0.0230	−0.125	0.0401	−0.492	1.0000
Agriculture	0.1863	0.1791	0.2909	0.2654	−0.028	−0.017	0.083	0.003	0.1453	−0.632	1.0000
Trade	0.0290	0.0301	−0.2443	−0.141	−0.148	−0.096	−0.112	−0.070	0.0622	−0.132	−0.495	1.0000
Broad money	0.3664	0.3425	0.4384	0.0381	−0.158	−0.131	0.2697	−0.030	−0.209	−0.028	0.1212	−0.142	1.000

Table 8. The impact of PI on IV

	(1)	(2)	(3)	(4)	(5)	(6)	(7)
L.IV	0.223**	0.231**	0.212**	0.214**	0.231**	0.226**	0.189**
	(0.0949)	(0.0895)	(0.0929)	(0.0775)	(0.0916)	(0.0853)	(0.0768)
Inflation	0.0398***	0.0399***	0.0399***	0.0399***	0.0396***	0.0389***	0.0394***
	(0.0107)	(0.0109)	(0.0107)	(0.00992)	(0.0107)	(0.0109)	(0.00976)
Regime instability	0.0284**						0.0274**
	(0.0126)						(0.0126)
War		0.0110					0.0157
		(0.0344)					(0.0325)
Government instability			−0.0608**				−0.0595*
			(0.0276)				(0.0277)
Aggression (1)				0.0848			0.0873
				(0.0635)			(0.0617)
Aggression (2)					−0.0229		−0.0131
					(0.0280)		(0.0284)
Polity scale						−0.00715	−0.00477
						(0.00932)	(0.00974)
GDP	−0.555***	−0.523**	−0.584***	−0.495***	−0.536***	−0.636**	−0.589**
	(0.167)	(0.186)	(0.175)	(0.152)	(0.164)	(0.238)	(0.225)
Agriculture	−0.0313	−0.0270	−0.0317	−0.0250	−0.0284	−0.0337	−0.0318
	(0.0205)	(0.0216)	(0.0204)	(0.0200)	(0.0198)	(0.0234)	(0.0242)
Trade	−0.000130	1.23e-05	−0.000334	0.000221	−0.000117	−0.000344	−8.68e-05
	(0.000987)	(0.00116)	(0.000922)	(0.000787)	(0.000967)	(0.00114)	(0.000867)
Constant	2.761***	2.584**	2.911***	2.443***	2.661***	3.121**	2.908**
	(0.872)	(0.985)	(0.902)	(0.761)	(0.848)	(1.193)	(1.107)
Observations	168	168	168	168	168	168	168
Groups	14	14	14	14	14	14	14
Instr.	9	9	9	9	9	9	14
Hansen	0.578	0.596	0.664	0.536	0.581	0.572	0.633
AB AR(1)	0.194	0.193	0.184	0.195	0.193	0.172	0.157
AB AR(2)	0.129	0.121	0.152	0.194	0.116	0.121	0.208

Note: Robust standard errors in parentheses (*** p<0.01, ** p<0.05, * p<0.1)

Table 9. The impact of PI on IV controlling for broad money

	(1)	(2)	(3)	(4)	(5)	(6)	(7)
L.IV	0.207**	0.214**	0.200**	0.205**	0.215**	0.214**	0.183**
	(0.0841)	(0.0860)	(0.0903)	(0.0768)	(0.0826)	(0.0815)	(0.0835)
Inflation	0.0317***	0.031***	0.032***	0.032***	0.031***	0.031***	0.0326***
	(0.0103)	(0.0104)	(0.0106)	(0.0093)	(0.0104)	(0.0103)	(0.00954)
Regime instability	0.0282*						0.0276*
	(0.0138)						(0.0132)
War		0.0245					0.0256
		(0.0193)					(0.0278)
Government instability			−0.0438*				−0.0456*
			(0.0239)				(0.0231)
Aggression (1)				0.0529			0.0569
				(0.0484)			(0.0481)
Aggression (2)					−0.0221		−0.0155
					(0.0319)		(0.0317)
Polity scale						−0.00239	−0.00251
						(0.0067)	(0.00906)
GDP	−0.549***	−0.529***	−0.55***	−0.53***	−0.53***	−0.56***	−0.563***
	(0.146)	(0.141)	(0.157)	(0.137)	(0.142)	(0.161)	(0.177)
Agriculture	−0.0294*	−0.0266	−0.0272	−0.0275	−0.0267	−0.0278	−0.0295
	(0.0163)	(0.0156)	(0.0162)	(0.0157)	(0.0159)	(0.0166)	(0.0180)
Broad money	0.0118**	0.0121**	0.0112**	0.0108**	0.0117**	0.0115**	0.0104**
	(0.00499)	(0.00514)	(0.00501)	(0.0043)	(0.0050)	(0.0049)	(0.00445)
Constant	2.623***	2.520***	2.626***	2.555***	2.534***	2.657***	2.701***
	(0.671)	(0.648)	(0.727)	(0.625)	(0.653)	(0.728)	(0.804)
Observations	168	168	168	168	168	168	168
Groups	14	14	14	14	14	14	14
Instr.	9	9	9	9	9	9	14
Hansen	0.298	0.290	0.381	0.360	0.277	0.290	0.358
AB AR(1)	0.162	0.160	0.159	0.173	0.164	0.167	0.160
AB AR(2)	0.115	0.101	0.135	0.116	0.099	0.108	0.139

Note: Robust standard errors in parentheses (*** p<0.01, ** p<0.05, * p<0.1).

Table A1. List of Economic variables are used, definitions and sources

Indicator	Definition	Source
Inflation	Annual Percentage change in the consumer price index	International Monetary Fund (2020) World Bank (2020)
Income per capita	The real GDP per capita. We consider the income per capita indicator as it reflects the economic development of each nation. However, increasing in the GDP decreasing the inflation rate and thus its volatility.	World Bank (2020)
Trade openness	The ratio of total foreign trade relative to GDP. The literature suggested that more open economies lead to more diversity in consumption, which may reduce the sensitivity of consumer prices to price shocks in specific markets, therefore, decreasing IV.	World Bank (2020)
Broad money	The standard deviation of the annual growth rate of Broad Money (volatility of the money supply growth). Rises in the money supply will increase inflation and its volatility.	World Bank (2020)
The size of the Agriculture sector	Value-added of the Agriculture sector relative to GDP. We include the size of the agriculture sector indicator as it is considering as a measure of the shadow economy (informal sector). The literature suggested that the relationship between the agriculture sector and inflation rate is positive (Barugahara, 2015). But we expected a negative relationship depends on the fact that most of the MENA region counties do not have big agriculture sectors, except for the North African countries around the Mediterranean Sea, such as Tunisia, Morocco, and Egypt.	World Bank (2020)

Note: International Monetary Fund (2020) Data page https://data.imf.org/?sk=388dfa60-1d26-4ade-b505-a05a558d9a42

World Bank (2020) data page http://datatopics.worldbank.org/world-development-indicators/

Table A2. List of political indicators used, definitions, and sources

Indicator	Definition	Source
Anti-government Demonstrations	Any peaceful public gathering of at least 100 people for the primary purpose of displaying or voicing their opposition to government policies or authority, excluding demonstrations of a distinctly anti-foreign nature.	DataBanks International Cross-National Time-Series Data Archive
Assassinations	Any politically motivated murder or attempted murder of a high government official or politician.	DataBanks International Cross-National Time-Series Data Archive
General Strikes	Any strike of 1,000 or more industrial or service workers involves more than one employer and is aimed at national government policies or authority.	DataBanks International Cross-National Time-Series Data Archive
Terrorism/Guerrilla Warfare	Any armed activity, sabotage, or bombings carried on by independent bands of citizens or irregular forces and aimed at the overthrow of the present regime.	DataBanks International Cross-National Time-Series Data Archive
Major Government Crises	Any rapidly developing situation that threatens to bring the downfall of the present regime—excluding situations of revolt aimed at such overthrow.	DataBanks International Cross-National Time-Series Data Archive
Purges	Any systematic elimination by jailing or executing political opposition within the ranks of the regime or the opposition.	DataBanks International Cross-National Time-Series Data Archive
Revolutions	Any illegal or forced change in the top government elite, any attempt at such a change, or any successful or unsuccessful armed rebellion whose aim is independence from the central government.	DataBanks International Cross-National Time-Series Data Archive
Riots	Any violent demonstration or clash of more than 100 citizens involving the use of physical force.	DataBanks International Cross-National Time-Series Data Archive
Number of Major Constitutional Changes	Major Constitutional Changes The number of basic alterations in a state’s constitutional structure, the extreme case being the adoption of a new constitution that significantly alters the prerogatives of the various branches of government. Examples of the latter might be the substitution of presidential for parliamentary government or the replacement of monarchical by republican rule. Constitutional amendments which do not have a significant impact on the political system are not counted.	DataBanks International Cross-National Time-Series Data Archive
Number of Major Cabinet Changes	The number of times in a year that a new premier is named and/or 50% of the cabinet posts are assumed by new ministers.	DataBanks International Cross-National Time-Series Data Archive
Executive Changes	The number of times in a year that effective control of executive power changes hands. Such a change requires that the new executive be independent of his predecessor.	DataBanks International Cross-National Time-Series Data Archive
Number of Legislative Elections	The number of elections held for the lower house of a national legislature in a given year. A limited number of by-elections are included, but most are not.	DataBanks International Cross-National Time-Series Data Archive
Successful Coups	The Number of successful coups d’Etat that occurred in the year of record	Integrated Network for Societal Conflict Research (INSCR)
Attempted Coups	The Number of attempted (but ultimately unsuccessful) coups d’Etat that occurred in the year of record	Integrated Network for Societal Conflict Research (INSCR)
Plotted Coups	The Number of (thwarted) coup plots that were reported by government officials during the year of record	Integrated Network for Societal Conflict Research (INSCR)
Alleged Coup Plots	The Number of alleged coup plots announced by government officials during the year of record (allegations of coup plots usually involve less formal adjudication procedures and are often used by authorities to justify repression of opposition leaders)	Integrated Network for Societal Conflict Research (INSCR)
Civil Warfare	The number of civil warfare involving that state in that year	Integrated Network for Societal Conflict Research (INSCR)
Ethnic Warfare	The number of ethnic warfare involving that state in that year	Integrated Network for Societal Conflict Research (INSCR)
Polity scale	From strongly democratic (+10) to strongly autocratic (−10)	Integrated Network for Societal Conflict Research (INSCR)

Note: h A. 2020. Cross-National Time-Series Data Archive. Databanks International. Jerusalem, Israel; see https://www.cntsdata.com/

Integrated Network for Societal Conflict Research (INSCR) Data page, http://www.systemicpeace.org/inscrdata.html

Table A3. List of the MENA countries included in the study

Algeria	Bahrain
Djibouti	Egypt
Iran	Iraq
Israel	Jordan
Kuwait	Morocco
Oman	Saudi Arabia
Tunisia	United Arab Emirates

Table B1. The Impact of PI on IV Using Standard Deviation of Inflation as Measure of IV

	(1)	(2)	(3)	(4)	(5)	(6)	(7)
L.IV	0.403***	0.427***	0.403***	0.433***	0.407***	0.411***	0.0225*
	(0.0315)	(0.0353)	(0.0307)	(0.0382)	(0.0308)	(0.0363)	(0.0110)
Inflation	0.456***	0.457***	0.454***	0.453***	0.455***	0.457***	0.0404***
	(0.0934)	(0.0918)	(0.0935)	(0.0895)	(0.0925)	(0.0969)	(0.00825)
Region instability	0.0818						0.0319*
	(0.135)						(0.0167)
War		0.445***					0.0259
		(0.108)					(0.0345)
Government instability			−0.255				−0.0600**
			(0.209)				(0.0251)
Aggression (1)				0.861***			0.0531
				(0.197)			(0.0511)
Aggression (2)					−0.0382		−0.0281
					(0.281)		(0.0325)
Polity scale						−0.0173	−0.000796
						(0.0655)	(0.0134)
GDP	−0.881	−0.198	−1.045	−1.387	−0.895	−0.662	−0.602**
	(0.840)	(0.829)	(0.738)	(0.927)	(0.816)	(1.121)	(0.261)
Agriculture	−0.157	−0.0958	−0.176	−0.199	−0.164	−0.151	−0.0304
	(0.151)	(0.148)	(0.139)	(0.136)	(0.146)	(0.133)	(0.0289)
Trade	−0.00237	0.00219	−0.00346	−0.00504	−0.00244	−0.00169	0.000386
	(0.0046)	(0.0052)	(0.0043)	(0.00461)	(0.0046)	(0.0043)	(0.000920)
Constant	4.846	1.026	5.761	7.354	4.935	3.828	2.921**
	(4.335)	(4.472)	(3.800)	(4.680)	(4.207)	(5.328)	(1.255)
Observations	168	168	168	168	168	168	168
Groups	14	14	14	14	14	14	14
Inst.	9	9	9	9	9	9	14
Hansen	0.277	0.277	0.341	0.399	0.127	0.244	0.486
AB AR(1)	0.021	0.021	0.021	0.021	0.016	0.021	0.174
AB AR(2)	0.879	0.879	0.674	0.628	0.863	0.813	0.204

Note: Robust standard errors in parentheses (*** p < 0.01, ** p < 0.05, * p < 0.1).

Table B2. The Impact of PI on IV with annualised IV by using Beta lags (MIDAS weight)

	(1)	(2)	(3)	(4)	(5)	(6)	(7)
L.IV	0.211*	0.220*	0.199	0.200*	0.220*	0.215*	0.174*
	(0.114)	(0.108)	(0.113)	(0.0929)	(0.110)	(0.104)	(0.0943)
Inflation	0.0392***	0.0393***	0.0393***	0.0393***	0.0389***	0.0383***	0.0390***
	(0.0101)	(0.0103)	(0.0101)	(0.00928)	(0.0101)	(0.0103)	(0.00916)
Regime instability	0.0269*						0.0260*
	(0.0131)						(0.0129)
War		0.0133					0.0178
		(0.0364)					(0.0342)
Government instability			−0.0567*				−0.0564*
			(0.0277)				(0.0276)
Aggression (1)				0.0890			0.0923
				(0.0629)			(0.0620)
Aggression (2)					−0.0202		−0.0101
					(0.0285)		(0.0288)
Polity scale						−0.00615	−0.00404
						(0.00954)	(0.01000)
GDP	−0.532***	−0.497**	−0.560***	−0.470***	−0.514***	−0.600**	−0.550**
	(0.160)	(0.178)	(0.166)	(0.140)	(0.156)	(0.237)	(0.218)
Agriculture	−0.0286	−0.0240	−0.0290	−0.0223	−0.0259	−0.0304	−0.0279
	(0.0202)	(0.0213)	(0.0199)	(0.0194)	(0.0194)	(0.0235)	(0.0237)
Trade	−3.43e-05	0.000128	−0.000223	0.000331	−2.02e-05	−0.000214	9.08e-05
	(0.00101)	(0.00119)	(0.000957)	(0.000796)	(0.000990)	(0.00118)	(0.000893)
Constant	2.643***	2.449**	2.789***	2.318***	2.547***	2.944**	2.712**
	(0.848)	(0.956)	(0.868)	(0.713)	(0.823)	(1.198)	(1.080)
Observations	168	168	168	168	168	168	168
Groups	14	14	14	14	14	14	14
Instr.	9	9	9	9	9	9	14
Hansen	0.667	0.688	0.759	0.587	0.657	0.650	0.725
AB AR(1)	0.147	0.146	0.136	0.146	0.146	0.150	0.131
AB AR(2)	0.192	0.171	0.230	0.262	0.150	0.164	0.334

Note: Robust standard errors in parentheses (*** p < 0.01, ** p < 0.05, * p < 0.1).

Table B3. The impact of PI on IV from a General Model to Specific Model

	Regime instability		War	Government instability		Aggression (1)	Aggression (2)	Polity scale
	Model 1	Model 2		Model 1	Model 2
L.IV	0.246***	0.224***sss	0.253***	0.215**	0.234**	0.244***	0.250***	0.252***
	(0.0737)	(0.0697)	(0.0762)	(0.0781)	(0.0838)	(0.0630)	(0.0736)	(0.0705)
Regime ins.	0.0279*	0.0281*
	(0.0133)	(0.0135)
War			0.0288
			(0.0251)
Government instability				−0.0445*	−0.0441*
				(0.0244)	(0.0230)
Aggression (1)						0.0526
						(0.0459)
Aggression (2)							−0.0214
							(0.0303)
Polity scale								−0.00287
								(0.00782)
Inflation	0.0301**	0.031***	0.0301**	0.032***	0.0264**	0.030***	0.0300**	0.0299**
	(0.0100)	(0.0102)	(0.0102)	(0.0105)	(0.0089)	(0.0088)	(0.0101)	(0.0101)
GDP	−0.52***	−0.53***	−0.472**	−0.56***	−0.34***	−0.48***	−0.51***	−0.553**
	(0.161)	(0.138)	(0.165)	(0.186)	(0.109)	(0.153)	(0.160)	(0.215)
Agriculture	−0.0284		−0.0215	−0.0294		−0.0237	−0.0257	−0.0278
	(0.0194)		(0.0190)	(0.0205)		(0.0191)	(0.0187)	(0.0219)
Trade	−6.12e-0		0.000245	−0.00019		0.000166	−5.01e-0	−0.000126
	(0.0008)		(0.0008)	(0.0007)		(0.0007)	(0.0008)	(0.000945)
Broad money	0.0111**	0.0116**	0.0115**	0.0109**	0.0109*	0.0101**	0.0111**	0.0108**
	(0.0048)	(0.0050)	(0.0049)	(0.0049)	(0.0053)	(0.0043)	(0.0048)	(0.00472)
Constant	2.534***	2.574***	2.215**	2.713**	1.647***	2.315***	2.451***	2.630**
	(0.801)	(0.634)	(0.819)	(0.920)	(0.494)	(0.747)	(0.790)	(1.053)
Observations	168	168	168	168	168	168	168	168
Country	14	14	14	14	14	14	14	14
Ins.	11	10	11	11	10	11	11	11
Hansen	0.425	0.421	0.439	0.502	0.555	0.383	0.399	0.420
AB AR(1)	0.168	0.169	0.162	0.164	0.162	0.177	0.167	0.170
AB AR(2)	0.102	0.130	0.107	0.152	0.159	0.133	0.109	0.117

Note: Robust standard errors in parentheses (*** p < 0.01, ** p < 0.05, * p < 0.1).

Figure C1. Inflation rate for the MENA region versus the rest of the World.

Figure C2. Inflation and IV graph for each country.

Figure C2. Continued.

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