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Monetary Union in West Africa: An Agency of Restraint for Fiscal Policies?

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  • Paul Masson
  • Catherine Pattillo

Abstract

Could a monetary union in West Africa (either an informal monetary union of the non-CFA countries, or a possible future monetary union of all ECOWAS members) be an effective 'agency of restraint' (Collier, 1991) on fiscal policies? We discuss the ways, both positive and negative, that monetary union could affect fiscal discipline and the arguments for explicit fiscal restraints considered in the literature about the European Monetary Union (EMU), and consider their applicability to West Africa. The empirical evidence, EMU literature and CFA experience all suggest the possibility that monetary union could create the temptation for fiscal profligacy through prospects of a bail-out, or costs that are diluted through the membership. We conclude that a monetary union in West Africa can be an effective agency of restraint on fiscal policies only if the hands of the fiscal authorities are also tied by a strong set of fiscal restraint criteria, applicable not just for accession to monetary union, but throughout the life of the union. Copyright 2002, Oxford University Press.

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Bibliographic Info

Article provided by Centre for the Study of African Economies (CSAE) in its journal Journal of African Economies.

Volume (Year): 11 (2002)
Issue (Month): 3 (September)
Pages: 387-412

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Handle: RePEc:oup:jafrec:v:11:y:2002:i:3:p:387-412

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Cited by:
  1. Michal Hulej & Charalambos G. Tsangarides & Pierre Ewenczyk, 2006. "Stylized Factson Bilateral Trade and Currency Unions," IMF Working Papers 06/31, International Monetary Fund.
  2. Dorothy Engmann & Ousmane Dore & Benoít Anne, 2003. "Regional Impact of Cote D'Ivoire'S Sociopolitical Crisis," IMF Working Papers 03/85, International Monetary Fund.
  3. Jean-Louis Combes & Xavier Debrun & Alexandru Minea & Rene Tapsoba, 2014. "Inflation Targeting and Fiscal Rules: Do Interactions and Sequencing Matter?," IMF Working Papers 14/89, International Monetary Fund.
  4. Balogun, Emmanuel Dele, 2008. "An alternative reconsideration of macroeconomic convergence criteria for West African Monetary Zone," MPRA Paper 11367, University Library of Munich, Germany.
  5. Balogun, Emmanuel Dele, 2009. "Alternative reconsideration of output growth differrential for the West African Monetary Zone," MPRA Paper 13416, University Library of Munich, Germany.
  6. Chantal Dupasquier & Patrick N. Osakwe & Shandre M. Thangavelu, 2005. "Choice of Monetary and Exchange Regimes in ECOWAS: An Optimum Currency Area Analysis," SCAPE Policy Research Working Paper Series 0510, National University of Singapore, Department of Economics, SCAPE.
  7. Ian Lienert, 2003. "A Comparison Between Two Public Expenditure Management Systems in Africa," IMF Working Papers 03/2, International Monetary Fund.
  8. Etienne B. Yehoue, 2007. "The CFA Arrangements," IMF Working Papers 07/19, International Monetary Fund.
  9. Jan Libich & Andrew Hughes Hallett & Petr Stehlik, 2007. "Monetary And Fiscal Policy Interaction With Various Degrees And Types Of Commitment," CAMA Working Papers 2007-21, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  10. Sampawende Jules Tapsoba, 2011. "Union Monétaire en Afrique de l'Ouest: Quelles Réponses à l'Hétérogénéité des Chocs ?," Working Papers halshs-00554309, HAL.
  11. Balogun, Emmanuel Dele, 2009. "Inflation differential in the West African Monetary Zone (WAMZ) area:Implications for unionization," MPRA Paper 13045, University Library of Munich, Germany.

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