Monetary Union in West Africa: An Agency of Restraint for Fiscal Policies?
March 1, 2001
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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.
Subject: Budget planning and preparation, Economic integration, Fiscal policy, Government asset and liability management, Government debt management, Monetary unions, Public financial management (PFM)
Keywords: Budget planning and preparation, CFA franc, CFA franc zone, ECOWAS, ECOWAS country, ECOWAS monetary union project, Europe, exchange rate, fiscal discipline, fiscal rules, GDP ratio, Government asset and liability management, Government debt management, monetary union, Monetary unions, WAEMU countries in ECOWAS, WAEMU country, WAEMU ECOWAS country, WAEMU monetary union, West Africa, WP
Pages:
33
Volume:
2001
DOI:
Issue:
034
Series:
Working Paper No. 2001/034
Stock No:
WPIEA0342001
ISBN:
9781451845266
ISSN:
1018-5941
