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

Catherine Pattillo and Paul Masson

No 2001/034, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; ECOWAS country; ECOWAS monetary union project; WAEMU country; CFA franc; exchange rate; monetary union; West Africa; fiscal rules; fiscal discipline; ECOWAS; CFA franc zone; GDP ratio; WAEMU countries in ECOWAS; WAEMU monetary union; WAEMU ECOWAS country; Monetary unions; Government debt management; Government asset and liability management; Budget planning and preparation; Europe (search for similar items in EconPapers)
Pages: 33
Date: 2001-03-01
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Citations: View citations in EconPapers (13)

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