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Crisis? What crisis? Measuring economic crisis in political science

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Abstract

An influential body of scholarship in political science has investigated the impact of economic crisis on various political outcomes. The vast majority of these studies rely on annual growth rates (AGR) to specify economic crisis. I argue that this canonical approach comes with several logical shortcomings. It leads to misguided impressions of crisis severity; it makes no distinction between rapid expansion years and rapid recovery years; and it disregards the financial dimension of economic crises. I present and discuss three alternative approaches of measuring economic crisis, imported from economics: economic shocks, economic slumps, and measures of financial crises. Examples from the regime instability literature demonstrate that these alternative crisis measurements provide results that are theoretically more nuanced and empirically more robust. On this basis, the article encourages researchers to pay more attention to the way they measure economic crisis in general and to supplement the AGR approach with alternative crisis measures in particular.

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Notes

  1. That is, studies focusing on events such as regime breakdown in democracies and autocracies, coup attempts, civil war onsets, and irregular leader removals.

  2. Typically calculated at market prices based on constant currency.

  3. In the economics literature, the empirical relationship between these two aspects of the national economy has been widely studied (see e.g. Bernanke 1983; Brunnermeier and Sannikov 2014).

  4. At a time when it was higher than ever before in that country.

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Correspondence to Suthan Krishnarajan.

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Krishnarajan, S. Crisis? What crisis? Measuring economic crisis in political science. Qual Quant 53, 1479–1493 (2019). https://doi.org/10.1007/s11135-018-0823-5

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