Political instability and economic growth in France: insights from the ARDL approach

This study examines the relationship between political instability and economic growth in France over the period 1960–2025, distinguishing between its formal and informal dimensions through exploratory factor analysis. Using an Autoregressive Distributed Lag (ARDL) framework, with the Pesaran-Shin-Smith bounds test as the primary basis for cointegration inference, we find a stable long-run relationship between political instability and growth. A Johansen test applied to a reduced system, together with Fully Modified and Dynamic Ordinary Least Squares (FMOLS and DOLS) estimates, is used to assess the robustness of the results. The findings indicate that informal political instability, reflected in strikes, riots, and anti-government demonstrations, significantly reduces economic growth in both the short and long run. Formal political instability, captured by government crises, cabinet changes, and legislative elections, exerts a negative effect in the short run but a positive effect in the long run, consistent with institutional adaptation in a mature democracy. A Fourier-augmented Toda-Yamamoto test reveals a bidirectional causal relationship between informal instability and economic growth. These results highlight the importance of social dialogue in limiting the economic costs of social unrest.