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Monetary Union in West Africa

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  • Catherine A. Pattillo
  • Paul R. Masson

Abstract

Could a West African monetary union (either of the non-CFA countries, or all ECOWAS members) be an effective "agency of restraint" on fiscal policies? We discuss how monetary union could affect fiscal discipline and the arguments for explicit fiscal restraints considered in the European Monetary Union literature, and their applicability to West Africa. The empirical evidence, EMU literature, and CFA experience suggest that monetary union could create the temptation for fiscal profligacy through prospects of a bailout, or costs diluted through the membership. Thus, a West African monetary union could promote fiscal discipline only if the hands of the fiscal authorities are also tied by a strong set of fiscal restraints.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/34.

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Length: 33
Date of creation: 01 Mar 2001
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Handle: RePEc:imf:imfwpa:01/34

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Keywords: West Africa; West African Monetary Union; Trade; monetary union; central bank; fiscal discipline; inflation; fiscal policies; fiscal policy; fiscal deficits; fiscal restraints; budget deficits; fiscal deficit; monetary unions; fiscal performance; monetary policy; monetary fund; fiscal adjustment; public debt; fiscal authorities; excessive deficits; monetary financing; fiscal rules; fiscal constraints; government revenue; budget surplus; monetary cooperation; fiscal transfers; monetary regimes; fiscal indiscipline; monetary zone; tax revenue; fiscal positions; official reserves; fiscal criteria; european monetary union; taxation; monetary system; fiscal indicators; money market; monetary base; fiscal convergence criteria; fiscal profligacy; tax revenues; fiscal convergence; fiscal restraint; european monetary system; fiscal federalism; monetary unification; monetary instruments; monetary policies; fiscal adjustments; fiscal expansion; fiscal sustainability; monetary stances; reducing fiscal deficits; open market operations; fiscal position; fiscal balances; monetary economics; national monetary policy; government deficit; public finances; fiscal accounts; money markets; fiscal coordination; government spending; budget process; fiscal flexibility; illusory fiscal adjustment; fiscal stabilizer; independent monetary policy; government securities; fiscal revenue; monetary authorities; cyclical fiscal policies; fiscal surpluses; monetary authority; fiscal institutions; excessive deficit procedure; monetary stability; monetary integration; fiscal policy coordination;

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Citations

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Cited by:
  1. Magazzino, Cosimo, 2012. "Revenue and expenditure nexus: A case study of ECOWAS," Economics Discussion Papers 2012-57, Kiel Institute for the World Economy.
  2. Etienne B. Yehoue, 2007. "The CFA Arrangements," IMF Working Papers 07/19, International Monetary Fund.
  3. Mahvash Saeed Qureshi & Charalambos G. Tsangarides, 2006. "What is Fuzzy About Clustering in West Africa?," IMF Working Papers 06/90, International Monetary Fund.
  4. Balogun, Emmanuel Dele, 2009. "Alternative reconsideration of output growth differrential for the West African Monetary Zone," MPRA Paper 13416, University Library of Munich, Germany.
  5. 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.
  6. André, NYEMBWE & Konstantin, KHOLODILIN, 2005. "North-South Asymmetric Relationships : Does the EMU Business Affect Small African Economies ?," Discussion Papers (ECON - Département des Sciences Economiques) 2005032, Université catholique de Louvain, Département des Sciences Economiques.
  7. Kohnert, Dirk, 2005. "Die UEMOA und die CFA-Zone: Eine neue Kooperations-Kultur im frankophonen Afrika?
    [The WEAMU and the Franc CFA-Zone: A new culture of co-operation within Francophone Africa?]
    ," MPRA Paper 5436, University Library of Munich, Germany.
  8. Simplice A, Asongu, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real, Monetary and Fiscal Policy Convergence Analysis," MPRA Paper 41552, University Library of Munich, Germany.
  9. Richard Pomfret, 2003. "Formation and Dissolution of Monetary Unions: Evidence from Europe, and Lessons for Elsewhere," School of Economics Working Papers 2003-03, University of Adelaide, School of Economics.
  10. Asongu Simplice, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real and Monetary Policy Convergence Analysis," Working Papers 12/005, African Governance and Development Institute..
  11. John Hawkins & Paul Masson, 2003. "Economic aspects of regional currency areas and the use of foreign currencies," BIS Papers chapters, in: Bank for International Settlements (ed.), Regional currency areas and the use of foreign currencies, volume 17, pages 4-42 Bank for International Settlements.
  12. Bamba, Lambert N'galadjo, 2004. "Analyse du Processus de Convergence Dans la Zone UEMOA," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  13. Zhao, Xiaodan & Kim, Yoonbai, 2009. "Is the CFA Franc Zone an Optimum Currency Area?," World Development, Elsevier, vol. 37(12), pages 1877-1886, December.
  14. Andre, Nyembwe, 2003. "Monetary Policy, Credibility and Asymmetries : Small African Countries and the EMU Advent," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 06 Aug 2002.
  15. Hefeker, Carsten, 2003. "Fiscal Reform and Monetary Union in West Africa," HWWA Discussion Papers 224, Hamburg Institute of International Economics (HWWA).
  16. Dorothy Engmann & Ousmane Dore & Benoít Anne, 2003. "Regional Impact of Cote D'Ivoire'S Sociopolitical Crisis," IMF Working Papers 03/85, International Monetary Fund.
  17. Mahvash Saeed Qureshi & Charalambos G. Tsangarides, 2011. "Exchange Rate Regimes and Trade: Is Africa Different?," Working Paper Series UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).
  18. Anthony J. Pellechio & Saqib Rizavi & Phebby Kufa, 2003. "Fiscal Sustainability and Policy Issues in the Eastern Caribbean Currency Union," IMF Working Papers 03/162, International Monetary Fund.
  19. Kohnert, Dirk, 2007. "Togo: Failed election and misguided aid at the roots of economic misery," MPRA Paper 5207, University Library of Munich, Germany.
  20. Katrin Elborgh-Woytek & Julian Berengaut, 2006. "Beauty Queens and Wallflowers," IMF Working Papers 06/226, International Monetary Fund.

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