Financial Instability and Inequality Dynamics in the WAEMU

  • Thierno Thioune

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: theconstruction 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.
Published
2017-04-24
How to Cite
Thioune, T. (2017). Financial Instability and Inequality Dynamics in the WAEMU. Econometric Research in Finance, 2(1), 43 - 62. https://doi.org/10.33119/ERFIN.2017.2.1.3
Section
Articles