Monetary Union in West Africa: An Agency of Restraint for Fiscal Policies?

Author/Editor:

Catherine A Pattillo ; Paul R Masson

Publication Date:

March 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Could a West African monetary union (either of the non-CFA countries, or all ECOWAS members) be an effective "agency of restraint" on fiscal policies? We discuss how monetary union could affect fiscal discipline and the arguments for explicit fiscal restraints considered in the European Monetary Union literature, and their applicability to West Africa. The empirical evidence, EMU literature, and CFA experience suggest that monetary union could create the temptation for fiscal profligacy through prospects of a bailout, or costs diluted through the membership. Thus, a West African monetary union could promote fiscal discipline only if the hands of the fiscal authorities are also tied by a strong set of fiscal restraints.

Series:

Working Paper No. 2001/034

Subject:

Budget planning and preparation Economic integration Fiscal policy Government asset and liability management Government debt management Monetary unions Public financial management (PFM)

English

Publication Date:

March 1, 2001

ISBN/ISSN:

9781451845266/1018-5941

Stock No:

WPIEA0342001

Pages:

33

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