Abstract

The financial reforms carried out by UEMOA do not immunize it from recurrent financial crises on a global scale. This article examines the effect of financial instability on the relationship between financial development and economic growth in 7 WAEMU countries. The GMM System method is used to estimate a non-linear model over the period 1981-2015. Our results show that financial development is good for growth. On the other hand, financial instability, measured by an indicator, cancels out the beneficial effect of financial development on growth. In order to preserve the liberal character of the financial sector and allow banks to grow, the study supports the idea of continued reforms in the face of financial and economic upheavals.