The objective of this chapter is to identify the effect of political instability on investment and economic growth. By using a dynamic balanced panel data model applied on annual data from 11 countries from the Middle East and North Africa (MENA) region over the period of 2000 to 2009. The political instability’ effect on the contribution of investment to economic growth has been the subject of a second empirical study using a simultaneous equation model conducted on a sample of 33 countries over the period 2000-2015.The main outcomes drawn by these two empirical tests prove that there is no effect of political instability on investment and economic growth and a negative interaction between political instability and investment. This finding confirms the idea that the importance of political institutions lies in the preparation of good economic institutions. Thus, political institutions indirectly influence economic performance.
Higher Institut of Management (ISG) of Gabès, Tunisia.