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Fiscal rules and the pro-cyclicality of public investment in the West African economic and monetary union

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  • Dessus, Sebastien
  • Diaz Sanchez, Jose Luis
  • Varoudakis, Aristomene

Abstract

Evidence from a large panel of low-income and lower middle-income countries over the period 1995-2012 suggests that, contrary to other countries, public investment in the West African Economic and Monetary Union (WAEMU) has been pro-cyclical. Public investment contracts more in"bad times"than it increases in"good times"and appears to have become pro-cyclical since the introduction of the fiscal convergence criteria in 1994. The pro-cyclicality of public expenditure and the high asymmetry of shocks that affect WAEMU countries justify exploring options for greater counter-cyclicality of rules-based fiscal frameworks and for risk-sharing.

Suggested Citation

  • Dessus, Sebastien & Diaz Sanchez, Jose Luis & Varoudakis, Aristomene, 2013. "Fiscal rules and the pro-cyclicality of public investment in the West African economic and monetary union," Policy Research Working Paper Series 6562, The World Bank.
    • Handle: RePEc:wbk:wbrwps:6562
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    References listed on IDEAS

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    Cited by:

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    2. Gladys Awinpoak Abindaw Nabieu & Godfred Alufar Bokpin & Achampong Kofi Osei & Patrick Opoku Asuming, 2021. "Fiscal rules, fiscal performance and economic growth in Sub‐Saharan Africa," African Development Review, African Development Bank, vol. 33(4), pages 607-619, December.
    3. Guerguil, Martine & Mandon, Pierre & Tapsoba, René, 2017. "Flexible fiscal rules and countercyclical fiscal policy," Journal of Macroeconomics, Elsevier, vol. 52(C), pages 189-220.
    4. M. K. Alabi & K. Amirthalingam, 2020. "Fiscal Policy and the Business Cycle in the West African Monetary Zone," Working Papers 8, Department of Economics, University of Ilorin.
    5. Joseph Mawejje, 2024. "Fiscal Vulnerabilities in Low-Income Countries: Evolution, Drivers, and Policies," World Bank Publications - Books, The World Bank Group, number 42239, April.
    6. Ryota Nakatani, 2021. "Fiscal Rules for Natural Disaster- and Climate Change-Prone Small States," Sustainability, MDPI, vol. 13(6), pages 1-26, March.
    7. Combes, Jean-Louis & Minea, Alexandru & Sow, Moussé, 2017. "Is fiscal policy always counter- (pro-) cyclical? The role of public debt and fiscal rules," Economic Modelling, Elsevier, vol. 65(C), pages 138-146.
    8. Cezara Vinturis, 2019. "A multi-speed fiscal Europe? Fiscal Rules and Fiscal Performance in the EU Former Communist Countries," Working Papers hal-03097483, HAL.
    9. Slawomir Franek & Marta Postula, 2020. "Does Eurozone Membership Strengthen the Significance of Fiscal Instruments?," Annals of Economics and Finance, Society for AEF, vol. 21(1), pages 131-151, May.

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    Keywords

    Public Sector Expenditure Policy; Debt Markets; Economic Stabilization; Fiscal Adjustment; Access to Finance;
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