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Policy Mix Coherence: What Does it Mean for Monetary Policy in West Africa?

Author

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  • Nasser Ary Tanimoune

    (School of International Development and Global Studies - School of International Development and Global Studies - University of Ottawa [Ottawa])

  • Jean-Louis Combes

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

  • René Tapsoba

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

Abstract

This article examines the influence of Policy Mix coherence in Economic Community of West African States (ECOWAS). The paper innovates in two ways. First, through an interaction between the monetary conditions index and the primary structural fiscal balance, we highlight coherence-type complementarities between monetary policy and fiscal policy with regard to their effects on economic activity. Second, we show that the influence of the coherence of policy mix on the effect of monetary policy is different according to the stance of the economy within the four possible regimes of policy mix, mostly in the WAEMU subsample, where integration is deeper than in the non-WAEMU countries, thanks to the common currency (the Franc CFA) they share. The analysis is based upon a panel dataset from 1990 to 2006 and remains robust to alternative specifications used to calculate the monetary conditions index. Our results contribute to the debate regarding the prospect of an ECOWAS-wide common currency. Indeed, given the heterogeneity in the economic structure of its members States, more policy mix coherence seems necessary to avoid unexpected impacts of monetary policy on economic activity.

Suggested Citation

  • Nasser Ary Tanimoune & Jean-Louis Combes & René Tapsoba, 2012. "Policy Mix Coherence: What Does it Mean for Monetary Policy in West Africa?," CERDI Working papers halshs-00678712, HAL.
    • Handle: RePEc:hal:cdiwps:halshs-00678712
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00678712
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    2. GAMMADIGBE, Vigninou, 2015. "Policy Mix Coherence Index (PMCI) : A Proposal," MPRA Paper 63583, University Library of Munich, Germany.

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    More about this item

    Keywords

    Policy Mix; Structural Fiscal Balance; Monetary Conditions Index; Economic Community of West African States.; Economic Community of West African States;
    All these keywords.

    JEL classification:

    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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