Financial Instability and Inequality Dynamics in the WAEMU

Thierno Thioune ()

Econometric Research in Finance, 2017, vol. 2, issue 1, 43-62

Abstract: 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 infl uences 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-codes: C15 D63 E37 E44 G10 O55 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:sgh:erfinj:v:2:y:2017:i:1:p:43-62

DOI: 10.33119/ERFIN.2017.2.1.3

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