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Monetary Agreements Reform and Issue of the Key Fiscal Convergence Criterion in the West African Economic and Monetary Union (WAEMU)

Author

Listed:
  • Kebalo, Léleng

    (University of Lomé, Togo)

  • Zouri, Stéphane

    (Central Bank of West African States, Senegal)

Abstract

This paper estimates a fiscal deficit threshold that maximizes economic growth and is favorable to business cycles synchronization given the compliance of countries. The analysis covers the eight countries that form the West African Economic and Monetary Union (WAEMU) across 1990-2018. Our results show that 11.42% of the Gross Domestic Product (GDP) is the fiscal deficit threshold which should not to be exceeded and that fulfills the aforementioned conditions. Since the debt relief program in 2006, however, this threshold has been reduced from 11% to 3.97%. Therefore, compliance with the key fiscal convergence criterion limiting the fiscal deficit to 3% of the GDP and in force in the Union is pro-growth and favorable to business cycles synchronization. However, even if this convergence criterion seems rigorous for fiscal discipline and can be maintained, it could be adjusted to 4%. The paper discusses the advantages of this proposed adjustment.

Suggested Citation

  • Kebalo, Léleng & Zouri, Stéphane, 2022. "Monetary Agreements Reform and Issue of the Key Fiscal Convergence Criterion in the West African Economic and Monetary Union (WAEMU)," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 37(1), pages 30-53.
    • Handle: RePEc:ris:integr:0843
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    Citations

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    Cited by:

    1. Léleng Kebalo & Hamitande Dout & Mawuli K. Couchoro & Stéphane Zouri, 2022. "Intégration – commerciale, budgétaire, financière – régionale et inégalités de revenu dans la Communauté Economique des Etats de l'Afrique de l'Ouest (CEDEAO)," African Development Review, African Development Bank, vol. 34(S1), pages 102-116, July.
    2. Yaya Keho, 2024. "Does Budget Deficit Crowd Out Private Investment? Cote d’Ivoire As A Focus," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 16(2), pages 1-86, February.

    More about this item

    Keywords

    single currency; fiscal balance; business cycles synchronization; WAEMU;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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