Unpacking the Economic Consequences of Political Uncertainty in Fragile States : Insights from Togo

This paper investigates the impact of political uncertainty on economic activity in Togo over the period 2004-2018. Using Google Trends’ Search Volume Index, interacted with the Local Projection technique, I trace the impact of political uncertainty over several quarters, allowing non-linearity related to the business cycle and the fiscal stance. Results are as follows. First, political uncertainty is negatively correlated with economic activity. Second, the estimated impact of political uncertainty on economic activity depends on the cyclical position of the economy, with the negative impact of political uncertainty being higher in times of slack. Third, the findings suggest that the reduction in economic activity following a peak in political uncertainty is lower when the country is running a fiscal surplus. Fourth the impact of political uncertainty on economic activity operates mainly through the decline in household consumption