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This article assesses the effect of financial instability on income inequality and vice versa. The methodology used in this article is based on two approaches: the construction of the synthetic index of financial instability (SIFI) and the panel vector autoregressive (PVAR) approach. The results obtained help to explain that the disparity of income in a West African Economic and Monetary Union (WAEMU) country in each year negatively influences the stability of the financial sector the following year. Functions of impulse responses show that a shock to financial stability has a negative effect on itself and leads to a stable situation after seven periods. A rise in income inequality in WAEMU countries tends to mitigate financial instability at first, before boosting a higher level of instability. Following this increase, inequality will decline, but at a very slow pace. JEL classification: G10, D63, C15, E37, E44, O55

Auteur(s) : Thierno Thioune
Année de publication : 2017
Type : Article
Mise en ligne par : THIOUNE Thierno