Modelling the Effects of Political Polarisation on National Economic Performance Through Computational Simulations

Abstract

This paper examines how political polarisation affects the performance of the national economy through computational simulations. Political polarisation, characterised by rising ideological divisions, is detrimental to effective governance, causing economic instability, policymaking gridlock, and uncertainty. The research paper examines the impacts of these divisions on economic decision-making, fiscal policies, taxation and trade relations. Using agent-based models and simulations, the study examines historical patterns of global crises and their long-term impacts on economic stability. The findings show that polarisation has a significantly negative relationship with key economic indicators. Statistical analysis shows that the greater the polarisation, the greater the decline in economic growth; specifically, a shift from low to moderate polarisation will result in a 2.0% decline in economic growth, while high polarisation will lead to an overall 6.0% decline. The results point to the negative implications of polarisation on financial markets, where higher uncertainty scares off investments. In addition, the paper discusses possible policy responses and the necessity of institutional reforms to reduce the economic impact of political divisions. Future studies should examine the contribution of government interventions to addressing the economic challenges posed by polarisation. The study highlights the need to reduce political polarisation to achieve sustainable economic growth and stability amid global crises.