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On the implications of trade openness, foreign aid and democracy for Wagner’s law in developing countries: panel data evidence from west African monetary zone (WAMZ)

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  • Daniel Sakyi

    (Department of Economics, University of Pisa, Italy)

Abstract

The impact of trade openness, foreign aid and democracy on government expenditure in developing countries has been emphasized in the literature in recent decades. Nonetheless, most recent studies of Wagner’s law have often neglected the increasing role played by these policy variables. This paper provides an empirical analysis of the long run implications of trade openness, foreign aid and democracy for the fulfillment of Wagner’s law in West African Monetary Zone (WAMZ) countries using panel data techniques for the period 1980–2008. The paper finds the existence of Wagner’s law in WAMZ countries, but only when the role of these policy variables has been catered for. Therefore, if these countries are to meet the fiscal convergence criteria and ensure the sustainability of a single currency area, explicit sets of restraint on the national authorities and innovative and efficient ways of domestic revenue generation necessary to ensure that government revenue keep pace with its expenditure become crucial, because monetary union may not necessarily ensure fiscal discipline.

Suggested Citation

  • Daniel Sakyi, 2013. "On the implications of trade openness, foreign aid and democracy for Wagner’s law in developing countries: panel data evidence from west African monetary zone (WAMZ)," Journal of Developing Areas, Tennessee State University, College of Business, vol. 47(2), pages 319-339, July-Dece.
    • Handle: RePEc:jda:journl:vol.47:year:2013:issue2:pp:319-339
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    References listed on IDEAS

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    1. Kjell Hausken & Christian W. Martin & Thomas Plümper, 2004. "Government Spending and Taxation in Democracies and Autocracies," Constitutional Political Economy, Springer, vol. 15(3), pages 239-259, September.
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    Cited by:

    1. Stanley, Abban, 2020. "The prospect of the proposed Currency Union on intra-regional trade in East African Community," MPRA Paper 100512, University Library of Munich, Germany.
    2. Abban, Stanley, 2020. "The Prospect of the Proposed Currency Union on Intra-regional Trade: Southern African Customs Union," MPRA Paper 103123, University Library of Munich, Germany.
    3. Abban, Stanley & Ofori-Abebrese, Grace, 2019. "The Prospect Of ECOWAS Currency Union On Intra-Regional Trade," MPRA Paper 102226, University Library of Munich, Germany.
    4. Abban, Stanley, 2020. "On the Computation and Essence of the Nominal Convergence Criteria for Africa Currency Union: ECOWAS in Perspective," MPRA Paper 100215, University Library of Munich, Germany, revised 10 May 2020.
    5. Obeng, Samuel, 2015. "A Causality Test of the Revenue-Expenditure Nexus in Ghana," MPRA Paper 63735, University Library of Munich, Germany, revised 25 Feb 2015.

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    More about this item

    Keywords

    Wagner’s law; trade openness; foreign aid; democracy; WAMZ;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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