Policy Mix Coherence: What Does it Mean for Monetary Policy in West Africa?
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.
|Date of creation:||13 Mar 2012|
|Date of revision:|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00678712|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Hefeker, Carsten, 2003.
"Fiscal Reform and Monetary Union in West Africa,"
HWWA Discussion Papers
224, Hamburg Institute of International Economics (HWWA).
- Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
- 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.
- 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.
- Ludovic Aubert, 2003. "Les indices des conditions monetaires," Economie Internationale, CEPII research center, issue 96, pages 63-102.
- Sutherland, Alan, 1995.
"Fiscal Crises and Aggregate Demand: Can High Public Debt Reverse the Effects of Fiscal Policy?,"
CEPR Discussion Papers
1246, C.E.P.R. Discussion Papers.
- Sutherland, Alan, 1997. "Fiscal crises and aggregate demand: can high public debt reverse the effects of fiscal policy?," Journal of Public Economics, Elsevier, vol. 65(2), pages 147-162, August.
- Alan Sutherland, . "Fiscal Crises and Aggregate Demand: Can High Public Debt Reverse the Effects of Fiscal Policy?," Discussion Papers 95/17, Department of Economics, University of York.
- 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.
- Alesina, Alberto & Tabellini, Guido, 1987. "Rules and Discretion with Noncoordinated Monetary and Fiscal Policies," Economic Inquiry, Western Economic Association International, vol. 25(4), pages 619-30, October.
- 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.
- Beetsma, R.M.W.J. & Bovenberg, A.L., 1998.
"The optimality of a monetary union without a fiscal union,"
1998-81, Tilburg University, Center for Economic Research.
- Beetsma, Roel M W J & Bovenberg, A Lans, 2001. "The Optimality of a Monetary Union without a Fiscal Union," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 179-204, May.
- Beetsma, Roel & Bovenberg, A Lans, 1998. "The Optimality of a Monetary Union Without a Fiscal Union," CEPR Discussion Papers 1975, C.E.P.R. Discussion Papers.
- Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
- Jean-Baptiste Desquilbet & Patrick Villieu, 1998. "L'indépendance de la Banque centrale peut-elle être contreproductive ? Une illustration en économie ouverte," Revue Économique, Programme National Persée, vol. 49(6), pages 1415-1434.
- Duguay, Pierre, 1994. "Empirical evidence on the strength of the monetary transmission mechanism in Canada: An aggregate approach," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 39-61, February.
- Klein, Michael W. & Marion, Nancy P., 1997.
"Explaining the duration of exchange-rate pegs,"
Journal of Development Economics,
Elsevier, vol. 54(2), pages 387-404, December.
- Antonio Fatás & Ilian Mihov, 2003. "The Case for Restricting Fiscal Policy Discretion," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1419-1447.
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:halshs-00678712. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If references are entirely missing, you can add them using this form.