The Impact of Political Upheaval on Consumer Confidence: Causal Evidence from a Prime Minister's Disqualification in Pakistan

This research elucidates the complex interplay between consumer confidence and salient economic indicators, encompassing household perceptions of current and expected economic changes, the emigration of skilled workers, unemployment rates, and inflation, all within a framework of political instability precipitated by the Prime Minister’s disqualification on corruption charges. Network and mediation analyses demonstrated a marked shift in variable dynamics subsequent to this event. The decline in consumer confidence mirrored pessimism regarding present and future economic circumstances, exacerbated by increased emigration of skilled workers, elevated unemployment, and inflationary pressures. Mediation analysis further indicated that the emigration of skilled workers, unemployment, and inflationary pressures exerted an indirect negative influence on consumer confidence through their impact on household perceptions of prevailing and anticipated economic conditions. A causal inference methodology has substantiated the impact of the disqualification on the relationship between consumer sentiments and macroeconomic indicators. The study emphasizes the importance of policymakers addressing these concerns to cultivate a stable and favorable consumer perspective, which is essential for sustained economic growth.