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Stability pact and risk of pro-cyclical fiscal policy in Economic and Monetary Union countries: the case of UEMOA

Author

Listed:
  • Mamadou Diop

    (CREM UMR CNRS 6211, University of Rennes 1, France)

Abstract

In December 1999, the WAEMU countries have adopted the Pact of Convergence, Stability, Growth and Solidarity which states in its corrective arm, the basic fiscal balance, relative to nominal GDP, must be balanced. Implying that the presence of an unexpected adverse economic conditions, governments have a choice between respecting the fiscal criterion of the Covenant and not to support economic activity or stimulate economic activity through public spending and not meet the key criteria of the pact. This article's objective is to highlight the failures of the fiscal rule cannot be a lever action of public authorities and the consequences if it does not take into account the state of the economy. Two types of fiscal policies can be distinguished according to the economic situation: procyclical policy changing in the same direction as the business cycle and countercyclical fiscal policy that seeks to minimize fluctuations in economic conditions.

Suggested Citation

  • Mamadou Diop, 2013. "Stability pact and risk of pro-cyclical fiscal policy in Economic and Monetary Union countries: the case of UEMOA," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201408, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS, revised May 2014.
    • Handle: RePEc:tut:cremwp:201408
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    File URL: https://ged.univ-rennes1.fr/nuxeo/site/esupversions/390c3ba4-a67a-4817-96a1-a7752e69e5d3
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    Cited by:

    1. Thiombiano, Noel & Ouedraogo, Salifou & Moussa, Abiboulaye, 2022. "Fiscal policy rules and economic fluctuations in the countries of the West African Economic and Monetary Union (WAEMU)," Research in Economics, Elsevier, vol. 76(3), pages 252-263.

    More about this item

    Keywords

    Politique budgétaire procyclique; UEMOA (WAEMU); Pacte de convergence et de stabilité; Solde budgétaire de base; Politique budgétaire contracyclique;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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