Fiscal Policy Coordination in the Waemu After the Devaluation
IMF Working Papers, February 1, 1995
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- Fiscal Policy Coordination in the Waemu After the Devaluation
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Bibliographic details
- Authors: Christoph B. Rosenberg
- Published: February 1, 1995
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451844207.001
Summary / Background
- Examines economic implications of fiscal policy coordination in the West African Economic and Monetary Union (WAEMU) in the light of the January 1994 devaluation of the CFA franc.
- Identifies diverging tax, tariff, and budgetary policies across the zone and argues these generate fiscal externalities that have prevented the zone from reaping the full benefits of a monetary union.
- Argues that the devaluation increases the desirability of closer policy coordination to prevent detrimental fiscal externalities.
- Reviews and evaluates recent efforts in fiscal policy coordination within the WAEMU.
- Offers recommendations on the optimal design of tax and tariff rate structures, and the choice of budgetary convergence criteria.
Key Findings and Analysis
- Diverging tax, tariff, and budgetary politics within the WAEMU create fiscal externalities that reduce the gains from a monetary union.
- The January 1994 devaluation of the CFA franc intensifies the need for closer fiscal policy coordination.
- Fiscal externalities identified include cross-border effects of tax and tariff rate differentiation and interactions between deficit countries and zone countries.
- Specific technical terms and focal points used in the analysis: distortionary rate differentiation, effective tariff rate, excise rate, import VAT, rate level, rate structure, VAT rate, VAT system.
Recent Efforts Reviewed
- The paper reviews and evaluates recent efforts (as of publication) to improve fiscal policy coordination in the WAEMU. (No further specifics provided on the landing page.)
Policy Recommendations (as reported)
- Recommendations address:
- Optimal design of tax rate structures.
- Optimal design of tariff rate structures.
- Choice of budgetary convergence criteria.
- Emphasis that closer coordination is more desirable in the post-devaluation context to prevent detrimental fiscal externalities.
Subject Areas and Keywords
- Subject: Consumption taxes, Excises, Fiscal policy, Tariffs, Taxes, Value-added tax
- Keywords: CFA franc, Consumption taxes, deficit countries vis-à-vis zone country, distortionary rate differentiation, effective tariff rate, excise rate, Excises, fiscal externality, import VAT, rate level, rate structure, tariff rate, tariff system, Tariffs, Value-added tax, VAT rate, VAT system, WAEMU economy, WAEMU imports, WAEMU partner country Togo, West Africa, WP, zone country