Heterogeneity of Saving-Investment Causality and Fiscal Coordination Implication: The Case of an African Monetary Union
Monetary unions are characterized by contemporary institutional arrangements that entrust monetary policy to a supranational entity while fiscal policies are framed by rules imposed on the budget deficit. Limits on public deficits are usually justified by the idea that government deficits reduce national savings, which ultimately reduces domestic investment and economic growth. However, this idea that domestic savings must necessarily increase if investment increases cannot be taken for granted. Moreover, it is possible that within the union, countries reveal different saving-investment causality, which is capable of rendering considerable credibility and effectiveness of budgetary rules of government deficits systematic prohibition as a means to revitalize investment. This study raises the question of domestic savings-investment causality in an African monetary union with a focus on the WAEMU zone. It has been determined in each country from a methodology based on co integration vector representations analysis leading to error correction. The existence of a causality heterogeneity between savings-investment in this African monetary union leads to consider a new model of fiscal coordination in Africa incorporating this heterogeneity, including the adoption of a new budget rule more flexible based on a structural balance without public investment.
|Date of creation:||05 Mar 2011|
|Date of revision:||31 Aug 2013|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- Simplice A, Asongu, 2012.
"Are Proposed African Monetary Unions Optimal Currency Areas? Real, Monetary and Fiscal Policy Convergence Analysis,"
41552, University Library of Munich, Germany.
- Asongu Simplice, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real, Monetary and Fiscal Policy Convergence Analysis," Working Papers 12/006, African Governance and Development Institute..
- Asongu Simplice, 2012.
"A Short-run Schumpeterian Trip to Embryonic African Monetary Zones,"
12/001, African Governance and Development Institute..
- Simplice A Asongu, 2013. "A Short-run Schumpeterian Trip to Embryonic African Monetary Zones," Economics Bulletin, AccessEcon, vol. 33(1), pages 859-873.
- Simplice A, Asongu, 2012. "A Short-run Schumpeterian Trip to Embryonic African Monetary Zones," MPRA Paper 43190, University Library of Munich, Germany.
- Constantinos Alexiou, 2002.
"An Econometric Investigation into the Macroeconomic Relationship between Investment and Saving: Evidence from the EU Region,"
455, Queen Mary University of London, School of Economics and Finance.
- Constantinos Alexiou, 2004. "An Econometric Investigation into the Macroeconomic Relationship between Investment and Saving: Evidence from the EU Region," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(1), pages 1-14.
- Ibrahim A. Elbadawi & Francis M. Mwega, 2000. "Can Africa's Saving Collapse Be Reversed?," World Bank Economic Review, World Bank Group, vol. 14(3), pages 415-443, September.
- Skott,Peter, 2008.
"Conflict and Effective Demand in Economic Growth,"
Cambridge University Press, number 9780521066310.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, May.
- Valerie R. Bencivenga & Bruce D. Smith, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 195-209.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Jérôme Creel & Thierry Latreille & Jacques Le Cacheux, 2002.
"Le pacte de stabilité et les politiques budgétaires dans l’Union Européenne,"
Sciences Po publications
info:hdl:2441/2088, Sciences Po.
- Jérôme Creel & Thierry Latreille & Jacques Le Cacheux, 2002. "Le Pacte de stabilité et les politiques budgétaires dans l'Union européenne," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 245-297.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- Thomas I. Palley, 1996. "The Saving-Investment Nexus: Why it Matters and How it Works," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 1996-01, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
- Simplice A. Asongu, 2013.
"Real and monetary policy convergence: EMU crisis to the CFA zone,"
Journal of Financial Economic Policy,
Emerald Group Publishing, vol. 5(1), pages 20-38, February.
- Simplice A, Asongu, 2012. "Real and Monetary Policy Convergence: EMU Crisis to the CFA Zone," MPRA Paper 36051, University Library of Munich, Germany.
- Asongu Simplice, 2012. "Real and Monetary Policy Convergence: EMU Crisis to the CFA Zone," Working Papers 12/033, African Governance and Development Institute..
- Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:49411. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.