Strengthening the West African Economic and Monetary Union: The Role of Fiscal and Market Institutions in Economic Stabilization

By Olivier Basdevant, Patrick A. Imam, Tidiane Kinda, Aleksandra Zdzienicka

October 23, 2015

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Olivier Basdevant, Patrick A. Imam, Tidiane Kinda, and Aleksandra Zdzienicka. Strengthening the West African Economic and Monetary Union: The Role of Fiscal and Market Institutions in Economic Stabilization, (USA: International Monetary Fund, 2015) accessed November 23, 2024

Disclaimer: The views expressed herein are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

West African Economic and Monetary Union (WAEMU) countries face a well-known dilemma between the need to provide shock-smoothing mechanisms and the lack of adequate mechanisms to do so. WAEMU countries are subject to frequent and, to a large extent, asymmetric shocks. They have remained poorly diversified and vulnerable to external shocks, such as changing weather conditions. In addition to limited shock-smoothing mechanisms at the regional level, WAEMU members’ ability to respond to shocks through national policies is also constrained by limited fiscal space and the need to preserve external stability—not only at the national level but also at the union level. In this context, developing a well-defined fiscal rule framework at the national level would help to build the necessary fiscal space for shock-smoothing. In addition, the development of specific shock-smoothing mechanisms—including a more developed and integrated financial sector—would also be critical. In addition, promoting financial development is also a challenge, which needs to be addressed in tandem with an adequate surveillance system. Some of these challenges have been faced by other monetary unions, such as the euro area.

Subject: Deposit insurance, Financial institutions, Fiscal councils, Fiscal policy, Fiscal rules, Insurance, Public debt

Keywords: Bridge funding, DP, DPPP, Fiscal councils, Fiscal rules, Government, Insurance, Insurance fund, WAEMU authorities, WAEMU convergence criteria, WAEMU country, WAEMU economy, WAEMU member country, West Africa

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Departmental Paper No. 2015/011
Stock No:

SWAEMUEA
ISBN:

9781513567334
ISSN:

2616-5333

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