Dynamism in Economic Policies to Achieve Economic Stability: Evidence from Côte d’Ivoire

Abstract

After more than a decade of wandering, linked to successive socio-political instabilities, the institutional environment in Côte d'Ivoire is more or less favorable to the proper functioning of the economy. Indeed, these numerous crises have caused a deterioration in the business climate, pushing foreign investors to other more stable sub-regional economies. Since April 2011, the state has embarked on the implementation of economic policies that can improve the dynamism of the economy in order to initiate the development process. This study analyzes the dynamism of economic policy instruments on economic growth in Côte d'Ivoire. The analysis of the cointegration between the variables in our study shows the existence of a cointegration relationship. This justifies the choice of an autoregressive vector model with a lag. Through annual data covering the period 1987 to 2020, the results of our estimates show that a high tax rate would lead to a drop in the level of economic activity. This means that taxation has a distorting effect on economic activity because it promotes tax uninviting behavior such as tax evasion and tax evasion. Likewise, a high unemployment rate would lead to a considerable drop in economic growth. Conversely, increased government spending and controlled inflation would benefit the economy. It emerges from all of the above that intervention through the stimulus policy based on increased spending on education and health is necessary to stimulate the process of economic growth.

JEL Classification: E4, E62, O23

Paper type: Empirical research