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

34 Pages Posted: 29 Jan 2006

See all articles by Paul R. Masson

Paul R. Masson

International Monetary Fund (IMF) - Research Department; The Brookings Institution

Catherine A. Pattillo

International Monetary Fund (IMF) - Research Division

Date Written: March 2001

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: monetary union, West Africa, fiscal rules, fiscal discipline, ECOWAS, CFA franc zone

JEL Classification: E58, E61, E62, F33

Suggested Citation

Masson, Paul R. and Pattillo, Catherine, Monetary Union in West Africa: An Agency of Restraint for Fiscal Policies? (March 2001). IMF Working Paper No. 01/34, Available at SSRN: https://ssrn.com/abstract=879401

Paul R. Masson (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

The Brookings Institution ( email )

1775 Massachusetts Ave. NW
Washington, DC 20036-2188
United States
202-797-6278 (Phone)
202-797-2968 (Fax)

Catherine Pattillo

International Monetary Fund (IMF) - Research Division ( email )

700 19th Street NW
Washington, DC 20431
United States

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