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

Author

Listed:
  • Nasser Ary Tanimoune

    (School of International Development and Global Studies - School of International Development and Global Studies - University of 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?," Working Papers halshs-00678712, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00678712
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00678712
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    References listed on IDEAS

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    1. Nasser Ary Tanimoune & Patrick Plane, 2005. "Performance et convergence des politiques économiques en zone franc," Revue Française d'Économie, Programme National Persée, vol. 20(1), pages 235-268.
    2. Patrick PLANE & Nasser ARY TANIMOUNE, 2005. "Performances et convergence des politiques économiques : La zone franc en Afrique de l’Ouest," Working Papers 200503, CERDI.
    3. Nasser ARY TANIMOUNE & Jean-Louis COMBES & Patrick PLANE, 2005. "Les effets non linéaires de la politique budgétaire : le cas de l’Union Economique et Monétaire Ouest Africaine," Working Papers 200520, CERDI.
    4. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
    5. Carsten Hefeker, 2010. "Fiscal reform and monetary union in West Africa," Journal of International Development, John Wiley & Sons, Ltd., vol. 22(1), pages 86-102.
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    7. Galí, Jordi & Perotti, Roberto, 2003. "Fiscal Policy and Monetary Integration in Europe," CEPR Discussion Papers 3933, C.E.P.R. Discussion Papers.
    8. Xavier Debrun & Paul Masson & Catherine Pattillo, 2005. "Monetary union in West Africa: who might gain, who might lose, and why?," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 454-481, May.
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    Cited by:

    1. GAMMADIGBE, Vigninou, 2015. "Indice de cohérence du policy-mix : une proposition
      [Policy-mix coherence index : a proposal]
      ," MPRA Paper 63286, University Library of Munich, Germany.
    2. GAMMADIGBE, Vigninou, 2015. "Policy Mix Coherence Index (PMCI) : A Proposal," MPRA Paper 63583, University Library of Munich, Germany.

    More about this item

    Keywords

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

    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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