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Regional Economic Integration in West AfricaHeterogeneity of Saving-Investment Causality in Waemu Zone and Fiscal Coordination Implication

Regional Economic Integration in West Africa: Heterogeneity of Saving-Investment Causality in... [Monetary unions are characterized by contemporary institutional arrangements that entrust monetary policy to a supranational entity while fiscal policies are framed by rules imposed on the budget deficit. Limits on public deficits are usually justified by the idea that government deficits reduce national savings, which ultimately reduces domestic investment and economic growth. However, this idea that domestic savings must necessarily increase if investment increases cannot be taken for granted. Moreover, it is possible that within the union, countries reveal different saving-investment causality, which is capable of rendering considerable credibility and effectiveness of budgetary rules of government deficits systematic prohibition as a means to revitalize investment. This study raises the question of domestic savings-investment causality in the WAEMU zone. It has been determined in each country from a methodology based on co integration vector representations analyze leading to error correction. The existence of a causality heterogeneity between savings-investment in the WAEMU zone leads to consider a new model of fiscal coordination incorporating this heterogeneity, including the adoption of a new budget rule more flexible based on a structural balance without public investment.] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

Regional Economic Integration in West AfricaHeterogeneity of Saving-Investment Causality in Waemu Zone and Fiscal Coordination Implication

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Publisher
Springer International Publishing
Copyright
© Springer International Publishing Switzerland 2014
ISBN
978-3-319-01281-0
Pages
159 –178
DOI
10.1007/978-3-319-01282-7_7
Publisher site
See Chapter on Publisher Site

Abstract

[Monetary unions are characterized by contemporary institutional arrangements that entrust monetary policy to a supranational entity while fiscal policies are framed by rules imposed on the budget deficit. Limits on public deficits are usually justified by the idea that government deficits reduce national savings, which ultimately reduces domestic investment and economic growth. However, this idea that domestic savings must necessarily increase if investment increases cannot be taken for granted. Moreover, it is possible that within the union, countries reveal different saving-investment causality, which is capable of rendering considerable credibility and effectiveness of budgetary rules of government deficits systematic prohibition as a means to revitalize investment. This study raises the question of domestic savings-investment causality in the WAEMU zone. It has been determined in each country from a methodology based on co integration vector representations analyze leading to error correction. The existence of a causality heterogeneity between savings-investment in the WAEMU zone leads to consider a new model of fiscal coordination incorporating this heterogeneity, including the adoption of a new budget rule more flexible based on a structural balance without public investment.]

Published: Oct 18, 2013

Keywords: Monetary union; Savings-investment causality; Heterogeneity; Fiscal coordination; C51; C59; E62; F43; H50; O40

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