Estimating the Size of Fiscal Multipliers in the WAEMU Area

This article estimates the size of short- and long-term fiscal multipliers for fiscal revenue and aggregate and disaggregate public expenditure in the West African Economic and Monetary Union (WAEMU). The empirical methodology is based on the estimation of a vector error correction model using panel data from 1996 to 2023. The estimation results indicate that the short- and long-term fiscal multipliers in the WAEMU area are less than one and are relatively low compared with those in other similar economic zones. Consistent with the standard literature, our results show that output increases in response to a positive government expenditure shock, whereas output decreases in response to a positive fiscal revenue shock. The results using disaggregated government expenditure reveal that public investment expenditure has larger multipliers than public consumption expenditure in both the short and long run, highlighting the greater impact of capital investment on output. Furthermore, spending on human capital has much higher multipliers than spending on non-human capital over both the short and long run. This confirms the critical role of investing in human capital to foster sustainable growth.