GROWTH AND POLITICAL INSTABILITY: A THEORETICAL APPROACH WITH MACRO-DYNAMIC SIMULATION

This work is tending to use theoretical model (economic dynamic model), trying to explain the effect that Political Instability can have on the economic growth. Political instability is considered by economists as a serious issue, detrimental to economic performance. While talking about political unrest, we then think about African countries. Political instability in African countries can therefore be caused by internal and external factors. Coming from a country (Central African Republic) that suffers a lot from Political Instability, this analysis will help to contribute to the stability in my country and in all countries around the world. This work shows the leverage of Political Instability the rate of change in the capital stock per unit of effective labor which is the discrepancy between the actual investment per unit of effective labor (𝒔𝒚𝒕) and the break-even investment (𝒏 + 𝒈 + 𝝈)𝒌𝒕), used to keep the capital stock stable. By including the propensity of government change (𝒄 ∗), the result leads to a fall of capital change rate with a subsequent negative effect on the economic growth. This because with a high propensity of government change (c* > 0), the investment incentive will fade leading to a downward tendency of actual investment.