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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. Ernesto Hernández-Catá & C. A. François, 1998. "The West African Economic and Monetary Union: Recent Developments and Policy Issues," IMF Occasional Papers 170, International Monetary Fund.
  2. William Easterly, 1999. "When is fiscal adjustment an illusion?," Economic Policy, CEPR & CES & MSH, vol. 14(28), pages 55-86, 04.
  3. Beetsma, Roel & Uhlig, Harald, 1999. "An Analysis of the Stability and Growth Pact," Economic Journal, Royal Economic Society, vol. 109(458), pages 546-71, October.
  4. F. Gulcin Ozkan & Anne Sibert & Alan Sutherland, . "Monetary Union, Entry Conditions and Economic Reform," EPRU Working Paper Series 00-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  5. Stanley Fischer & Ratna Sahay & Carlos A. Vegh, 2002. "Modern Hyper- and High Inflations," NBER Working Papers 8930, National Bureau of Economic Research, Inc.
  6. 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.
  7. Paul R. Masson & Xavier Debrun & Catherine A. Pattillo, 2002. "Monetary Union in West Africa: Who Might Gain, Who Might Lose, and Why?," IMF Working Papers 02/226, International Monetary Fund.
  8. Etienne B. Yehoue, 2005. "On the Pattern of Currency Blocs in Africa," IMF Working Papers 05/45, International Monetary Fund.
  9. Beetsma,Roel M.W.J. & Bovenberg,A. Lans, 1995. "Monetary union without fiscal coordination may discipline policymakers," Research Memoranda 024, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
  10. 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.
  11. 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.
  12. Beetsma, Roel & Jensen, Henrik, 1999. "Structural Convergence Under Reversible and Irreversible Monetary Unification," CEPR Discussion Papers 2116, C.E.P.R. Discussion Papers.
  13. Sibert, Anne & Sutherland, Alan, 1997. "Monetary Regimes and Labour Market Reform," CEPR Discussion Papers 1731, C.E.P.R. Discussion Papers.
  14. Patrick Honohan & Stephen A. O'Connell, 1997. "Contrasting Monetary Regimes in Africa," IMF Working Papers 97/64, International Monetary Fund.
  15. Olawale Ogunkola, 2005. "An evaluation of the viability of a single monetary zone in ECOWAS," Research Papers RP_147, African Economic Research Consortium.
  16. Romain Veyrune, 2007. "Fixed Exchange Rates and the Autonomy of Monetary Policy: The Franc Zone Case," IMF Working Papers 07/34, International Monetary Fund.
  17. 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.
  18. Etienne B. Yehoue, 2007. "The CFA Arrangements-More than Just an Aid Substitute?," IMF Working Papers 07/19, International Monetary Fund.
  19. 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.
  20. 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.
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