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Fiscal Reform and Monetary Union in West Africa

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  • Hefeker, Carsten

Abstract

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.

Suggested Citation

  • Hefeker, Carsten, 2003. "Fiscal Reform and Monetary Union in West Africa," HWWA Discussion Papers 224, Hamburg Institute of International Economics (HWWA).
  • Handle: RePEc:zbw:hwwadp:26257
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    References listed on IDEAS

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    Cited by:

    1. Nasser Ary Tanimoune & Jean-Louis Combes & René Tapsoba, 2012. "Policy Mix Coherence: What Does it Mean for Monetary Policy in West Africa?," Working Papers halshs-00678712, HAL.
    2. Raji, Rahman Olanrewaju, 2012. "REAL Exchange Rate Misalignment and Economic Performance of WEST AFRICAN MONETARY ZONE:Implications for macroeconomic unionisation," MPRA Paper 37385, University Library of Munich, Germany.

    More about this item

    Keywords

    West Africa; monetary union; fiscal policy; structural reforms;

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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