Effects of Political Instability on Investment Efficiency in WAEMU Countries: An Empirical Analysis
- IUP Journal of Applied Economics , 24 (1) : 5-23
Résumé
This paper analyzes the effects of political instability on the efficiency of domestic investment in West African Economic and Monetary Union (WAEMU) countries.
To this end, the empirical model is estimated using double least squares (2SLS) technique and panel data. The analysis covers the period 2003 to 2023. The study
differs from other previous studies in that it takes into account the incremental capital-output ratio (ICOR) as an indicator of the efficiency of domestic investment.
The results show that political instability reduces the efficiency of domestic investment. Furthermore, interest rate and terms of trade are channels through which
political instability affects the efficiency of domestic investment. To improve the efficiency of domestic investment, the results suggest promoting political stability
by mitigating internal conflicts, coups, and police and electoral violence. Reducing political instability increases the efficiency of investment.
Mots-clés
Investment efficiency, Political instability, WAEMU, 2SLS method