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Fiscal Reform and Monetary Union in West Africa

  • Hefeker, Carsten

The paper explores the interaction between the proposed monetary union for ECOWAS and structural reforms of fiscal policy. The effects depend to a large extent on the degree of similarity of member countries. In a monetary union of similar countries, member states run a more distortive fiscal policy, while their structural reform efforts will fall. This is also the case for countries that unilaterally peg to an anchor currency or introduce a foreign currency. In an monetary union with dissimilar countries the reverse can happen for those member states that are confronted with high distortion countries. This result implies that current WAEMU members will run a less distortive fiscal policy after the inclusion of other members of ECOWAS.

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File URL: http://econstor.eu/bitstream/10419/19165/1/224.pdf
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Paper provided by Hamburg Institute of International Economics (HWWA) in its series HWWA Discussion Papers with number 224.

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Date of creation: 2003
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Handle: RePEc:zbw:hwwadp:26257
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  1. Beetsma, Roel M. W. J. & Lans Bovenberg, A., 1998. "Monetary union without fiscal coordination may discipline policymakers," Journal of International Economics, Elsevier, vol. 45(2), pages 239-258, August.
  2. Sibert, Anne & Sutherland, Alan, 1997. "Monetary Regimes and Labour Market Reform," CEPR Discussion Papers 1731, C.E.P.R. Discussion Papers.
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  4. Dixit, Avinash & Lambertini, Luisa, 2003. "Symbiosis of monetary and fiscal policies in a monetary union," Journal of International Economics, Elsevier, vol. 60(2), pages 235-247, August.
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  8. Easterly, William, 1999. "When is fiscal adjustment an illusion?," Policy Research Working Paper Series 2109, The World Bank.
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  12. Guillaume, Dominique M. & Stasavage, David, 2000. "Improving Policy Credibility: Is There a Case for African Monetary Unions?," World Development, Elsevier, vol. 28(8), pages 1391-1407, August.
  13. 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.
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  16. Clausen, Volker & Wohltmann, Hans-Werner, 2005. "Monetary and Fiscal Policy in a Large Asymmetric Monetary Union - A Dynamic Three-Country Analysis," Economics Working Papers 2005,18, Christian-Albrechts-University of Kiel, Department of Economics.
  17. 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.
  18. Stanley Fischer & Ratna Sahay & Carlos A. Vegh, 2002. "Modern Hyper- and High Inflations," NBER Working Papers 8930, National Bureau of Economic Research, Inc.
  19. David Fielding & Kalvinder Shields, 2003. "Economic Integration in West Africa: Does the CFA Make a Difference?," Discussion Papers in Economics 03/8, Department of Economics, University of Leicester.
  20. Etienne B. Yehoue, 2005. "On the Pattern of Currency Blocs in Africa," IMF Working Papers 05/45, International Monetary Fund.
  21. Patrick Honohan & Stephen A. O'Connell, 1997. "Contrasting Monetary Regimes in Africa," IMF Working Papers 97/64, International Monetary Fund.
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