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Financial instability and Inequality Dynamics in the WAEMU

This article assesses the relevance of financial instability caused by 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 (ISIF) and in panel VAR approach considered using the PVAR. The results obtained help to explain that the disparity of income in a WAEMU country, in a given year, negatively influences the instability of the financial sector the following year. Functions of impulse responses show that a shock on financial instability has a negative effect on itself and leads it to a stable situation after seven (7) periods. On the other hand, a rise in income inequality in the WAEMU countries tends to mitigate financial instability at first before boosting a higher level of instability. On the contrary, following this increase, inequalities will decline but at a very slow pace.

Auteur(s) : Thierno Thioune
Pages : 43-62
Année de publication : 2016
Revue : Econometric Research in Finance, ERFIN
N° de volume : Volume 2, Issue 1
Type : Article
Statut Editorial : Publié
Mise en ligne par : THIOUNE Thierno