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Fiscal Reform and Monetary Union in West Africa

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  • Hefeker, Carsten

Abstract

The paper explores the interaction between the proposed monetary union for ECOWAS and structural reforms of fiscal policy. The effects depend to a large extent on the degree of similarity of member countries. In a monetary union of similar countries, member states run a more distortive fiscal policy, while their structural reform efforts will fall. This is also the case for countries that unilaterally peg to an anchor currency or introduce a foreign currency. In an monetary union with dissimilar countries the reverse can happen for those member states that are confronted with high distortion countries. This result implies that current WAEMU members will run a less distortive fiscal policy after the inclusion of other members of ECOWAS. --

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Bibliographic Info

Paper provided by Hamburg Institute of International Economics (HWWA) in its series HWWA Discussion Papers with number 224.

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Date of creation: 2003
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Handle: RePEc:zbw:hwwadp:26257

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Web page: http://www.econstor.eu/handle/10419/20
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Keywords: West Africa; monetary union; fiscal policy; structural reforms;

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  1. Ozkan, F Gulcin & Sibert, Anne & Sutherland, Alan, 1997. "Monetary Union, Entry Conditions and Economic Reform," CEPR Discussion Papers 1720, C.E.P.R. Discussion Papers.
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  5. Stasavage, David, 1997. "The CFA Franc Zone and Fiscal Discipline," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 132-67, March.
  6. Fatás, Antonio & Rose, Andrew K, 2001. "Do Monetary Handcuffs Restrain Leviathan? Fiscal Policy in Extreme Exchange Rate Regimes," CEPR Discussion Papers 2692, C.E.P.R. Discussion Papers.
  7. Stanley Fischer & Ratna Sahay & Carlos A. Végh Gramont, 2002. "Modern Hyper- and High Inflations," IMF Working Papers 02/197, International Monetary Fund.
  8. Catherine A. Pattillo & Paul R. Masson, 2001. "Monetary Union in West Africa," IMF Working Papers 01/34, International Monetary Fund.
  9. Anne C. Sibert & Alan Sutherland, . "Monetary Regimes and Labour Market Reform," Discussion Papers 97/14, Department of Economics, University of York.
  10. William Easterly, 1999. "When is fiscal adjustment an illusion?," Economic Policy, CEPR;CES;MSH, vol. 14(28), pages 55-86, 04.
  11. Dixit, Avinash & Lambertini, Luisa, 2003. "Symbiosis of monetary and fiscal policies in a monetary union," Journal of International Economics, Elsevier, vol. 60(2), pages 235-247, August.
  12. Fielding, David, 1996. "Asymmetries in the Behaviour of Members of a Monetary Union: A Game-Theoretic Model with an Application to West Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 5(3), pages 343-65, October.
  13. Romain Veyrune, 2007. "Fixed Exchange Rates and the Autonomy of Monetary Policy," IMF Working Papers 07/34, International Monetary Fund.
  14. Clausen, Volker & Wohltmann, Hans-Werner, 2005. "Monetary and Fiscal Policy in a Large Asymmetric Monetary Union - A Dynamic Three-Country Analysis," Economics Working Papers 2005,18, Christian-Albrechts-University of Kiel, Department of Economics.
  15. Etienne B. Yehoue, 2005. "On the Pattern of Currency Blocs in Africa," IMF Working Papers 05/45, International Monetary Fund.
  16. Ernesto Hernández-Catá & C. A. François, 1998. "The West African Economic and Monetary Union," IMF Occasional Papers 170, International Monetary Fund.
  17. Guillaume, Dominique M. & Stasavage, David, 2000. "Improving Policy Credibility: Is There a Case for African Monetary Unions?," World Development, Elsevier, vol. 28(8), pages 1391-1407, August.
  18. Honohan, P. & Lane, P.R., 2000. "Will the Euro Trigger More Monetary Unions in Africa?," Research Paper 176, World Institute for Development Economics Research.
  19. David Fielding & Kalvinder Shields, 2003. "Economic Integration in West Africa: Does the CFA Make a Difference?," Discussion Papers in Economics 03/8, Department of Economics, University of Leicester.
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  21. Patrick Honohan & Stephen A. O'Connell, 1997. "Contrasting Monetary Regimes in Africa," IMF Working Papers 97/64, International Monetary Fund.
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Cited by:
  1. René TAPSOBA & Jean-Louis COMBES & Nasser ARY TANIMOUNE, 2012. "Policy Mix Coherence: What Does it Mean for Monetary Policy in West Africa?," Working Papers 201213, CERDI.

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