Top PDF INTERNATIONAL RESERVES ACCUMULATION AND ECONOMIC GROWTH IN THE WEST AFRICAN MONETARY ZONE

INTERNATIONAL RESERVES ACCUMULATION AND ECONOMIC GROWTH IN THE WEST AFRICAN MONETARY ZONE

INTERNATIONAL RESERVES ACCUMULATION AND ECONOMIC GROWTH IN THE WEST AFRICAN MONETARY ZONE

Human capital is the main source of growth in several endogenous growth models as well as one of the key extensions of the neoclassical growth model. Nelson and Phelps (1966) suggest that a large sized labour force makes it easier for a country to absorb new products or ideas that have been discovered elsewhere. Romer (1990) states that quality development of labour force generates new products or ideas that underlie technological progress. He also notes that those countries with a large and well developed labour force experience a more rapid rate of introduction of new goods and thereby tend to grow faster. A large number of studies has found evidence suggesting that educated population is key determinant of economic growth (see Barro, 1991; Mankiw et al, 1992; Barro and Sala-i-Martin, 1995; Brunetti et al, 1998, Hanushek and Kimko, 2000). However, there have been other scholars who have questioned these findings and, consequently, the importance of human capital as substantial determinant of economic growth (e.g. Levine and Renelt, 1992; Benhabib and Spiegel, 1994; Topel, 1999; Krueger and Lindahl, 2001; Pritchett, 2001).
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Monetary policy and economic performance of West African Monetary Zone Countries

Monetary policy and economic performance of West African Monetary Zone Countries

monetary policy on both real economic growth and inflation. Economic theory suggests that unrestrained monetary expansion would have a negative effect on output while fuelling inflationary pressures. The MRR can be interpreted to represent and reflect the general direction of interest rate policy being pursued from the perspective of the monetary authority (the national central banks). The magnitude and signs of the parameter estimates for CG and CP is designed to measure credit availability effects especially the extent to which credit to government have tended to crowd out private sector activities (which has adverse implication for growth and inflation). The evaluation criteria are two fold: (i) If the parameter estimates for the explanatory variables are not significant, we would admit that control over monetary policy may not matter to that country, as ex ante, it is of no effect (the country would be better off in terms of Pareto optimality criteria to surrender her control over it in favour of ex post benefits); (ii) If they are significant but with wrong signs from theoretical expectations, we would conclude that although it matters but with adverse implications, it would all the same, be most desirable for such country to surrender their sovereignty over monetary policy to a superior regional authority.
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International Migrant Remittances And Financial Sector Development: Evidence From West African Monetary Zone (WAMZ)

International Migrant Remittances And Financial Sector Development: Evidence From West African Monetary Zone (WAMZ)

World Economic Forum Report (2012), opined that Financial Sector Development (FSD) comprises of all the factors, policies and institutions which contributes to efficient financial intermediation and market, as well as deep and broad access to capital and financial services. In other words, financial development is said to occur when financial instruments, markets, and intermediaries interact in other to reduce the cost of financial services. It also involves establishing sound financial and regulatory framework with a view to stimulating economic growth and decent job creation. Financial development has been identified as an important tool in the economic development of many nations. To fully understand how crucial financial development is in the economic growth and poverty reduction, there is a need for the concept to be effectively measured. Despite the important of financial development, its measurment has remained very difficult in practice given the complexity and dimensions it encompasses. Most of the empirical studies have based their measurement of financial development on M2 as a ratio of GDP, financial institution assets as a ratio of GDP, and the ratio of deposit to GDP. Meanwhile, since the financial sector of any economy comprises of a variety of financial institutions, markets and products, the above measurement only serves as a rough estimate and do not fully capture all aspect of financial development. A comprehensive, but relatively simple 4x2 framework has been developed by the World Bank Global Financial Database (GFDD) to measure financial sector development across the globe. The GFDD identified four sets of variables to proxy a well-functioning financial system which includes: financial depth, access, efficiency, and stability. These four key variables which were categorized into two main components of the financial sector are the financial institution and the financial markets. Given this categorization, financial inclusion is a subset of financial development, as financial inclusion looks at only access to financial service at an affordable cost.
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Stock Market Integration in West African Monetary Zone: A Linear and Nonlinear Cointegration Approach

Stock Market Integration in West African Monetary Zone: A Linear and Nonlinear Cointegration Approach

Previous studies have emphasised ways to improve upon the existing path to single currency or challenges countries face in meeting the criteria. On stock markets, the earlier studies have concentrated on the effect on stock market development and the economy at the country level (Yartey and Adjasi, 2007; Ezeoha et al., 2009; Osamwonyi and Kasimu, 2013). Hence, the link between the stock market in the WAMZ countries has not been established in any previous studies. In addition, extensive discussion has also taken place of the macroeconomic performance of individual member countries in the zone. What is lacking in the earlier studies as far as WAMZ is concern is whether the capital markets are integrated or not. Meanwhile, the behaviour of the capital market is critical for growth and predicting possible future crisis like the recent Euro zone and the sub-prime crisis in the United States of America. For instance, stock markets a catalyst in predicting and promoting economic growth (Comincioli, 1995) as well as predicting recession (McCracken, 2010).
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An Empirical Test of Trade Gravity Model Criteria for the West African Monetary Zone (WAMZ)

An Empirical Test of Trade Gravity Model Criteria for the West African Monetary Zone (WAMZ)

Three main observations emerged within the literature with regard to the endogenenity of OCA criteria: first, Frankel and Rose, as well as several other authors, including Rodrik (1994), Helpman (1988) and Bradford and Chekwin (1993) raise the issue of simultaneity between trade and growth, and argue that causality may run from investment to growth and then to exports, rather than the other way around. Secondly, Mongelli (2002) noted that EMU has the character of a collective Endeavour both from an institutional and economic standpoint. It would be interesting to see this hypothesis tested in a more detailed model. Furthermore, the trade-channel should be operating in addition to other channels such as the nominal anchor effect (i.e. monetary discipline). Thirdly, relevant question at present in Europe is whether countries are in a currency union because they trade a lot, or start trading more because they are in a currency union. The same has happened for inflation in countries with a poor track record in maintaining low inflation after “anchoring” themselves to low inflation countries. Issing (2001) discusses the endogeneity of political integration, and Blanchard and Wolfers (2000) discuss the endogeneity of labour market institutions.
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Dynamics of Integration and Economic Growth of the West African Economic and Monetary Union (WAEMU)

Dynamics of Integration and Economic Growth of the West African Economic and Monetary Union (WAEMU)

The extreme curves represent confidence intervals at the 5% threshold, and the middle curve represents the evolution of GDP per capita. The shock of a variable justifies 95% of the growth behaviour. The shock of economic integration is pos- itive on the GDP per capita growth rate following a shock of the ICCIE variable. This shock has a persistent effect on growth (Figure 1). These results are similar to those of [34] [35], and [36]. Economic integration through trade flows has a significant influence on the growth rate of GDP per capita. On the other hand, according to [37], belonging to an integration zone has no significant effects on economic growth in the case of many regional integration agreements. The effects of the different integration stages on growth in WAEMU are presented in Figure 2.
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Assessing the effect of monetary policy on economic growth in franc zone

Assessing the effect of monetary policy on economic growth in franc zone

The central bank of West African states (BCEAO) is an international public institution with head office in Dakar (Senegal). It defines and implements monetary policies in WAEMU, ensures the banking system’s stability, implements WAEMU’s exchange rate policies under the terms set out by the council and manages the official exchange reserves of member countries. The Bank of Central African states (BEAC) with head office in Yaoundé (Cameroon) has the tasks of defining and setting the union’s monetary policy and the official reserves of the member countries. Also to promote the smooth operation of payment and settlement systems. The primary objective of BEAC is to ensure the monetary stability. Monetary policy can be defined as the process by which the government, central bank, or monetary authority of a country or a group of countries control the supply of money, availability of money, and cost of money or rate of interest to attain a set of objectives oriented towards the growth and stability of the economy.
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Fiscal policy and economic growth in the West African Economic Monetary Union Countries

Fiscal policy and economic growth in the West African Economic Monetary Union Countries

Identified decisions are somewhat dependent on the tax environment, and they are essentially support on factors that latitude to fuel the growth process. Therefore, these factors are a set of which may be borrowed to boost growth channels, which supports the idea that fiscal policy influences especially the growth or development in general (Musgrave 1987; Tanzi, 1991; Stiglitz, 2003; McGee, 2004; Perotti, 2005; de Castro and Hernández de Cos, 2006).If it is established that fiscal policy appears to be an essential instrument of economic development, can we assume that such an assertion is verified by WAEMU zone? In other words, is it possible to mobilize fiscal resources that allow States to meet their commitments to finance public investment, guarantee a virtuous growth based on improved social welfare? This is the question that this article attempts to provide answers, i.e. by showing that fiscal policy in the WAEMU zone helps foster economic growth.The remainder of this paper is structured around the following points Section two presents a summary of the literature that puts into perspective the role of fiscal policy on economic growth while Section three is devoted to the presentation of the methodology. The estimation results are analyzed in Section four, and conclusions drawn from the analysis are presented in Section five.
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Major Determinants of Foreign Direct Investment in the West African Economic and Monetary Region

Major Determinants of Foreign Direct Investment in the West African Economic and Monetary Region

The reduced form version of the FDI function in equation (3) clearly shows the factors that influence the inflow of FDI to the host countries. According to equation (3) foreign investors will prefer to invest in countries where they can produce large amount of production at a lower cost. The size of the economy and its growth rate are seen to critically affect the inflow of FDI to a particular country. Large and fast growing economy can offer economies of scale and also can reduce the transportation and product marketing cost as products will be mostly sold in the host economy. In fact, UNCTAD (1998, 2000) classifies a group of foreign investors who mainly invest in foreign countries to serve the domestic market. These market-seeking-foreign investors thus prefer to invest in countries with large domestic market and in countries which are growing at a faster rate (that is GDP per capita, GDPPC, and GDP growth rate, GDPGR). It is however, difficult to imagine that market seeking foreign investors will invest in foreign countries completely to serve the host economies. Rather it might be case that foreign investors might also export a portion of their product to other countries as well as selling in the host economy. It means a country with small domestic market, but well-linked and open to the global market through international trade (trade openness, OPN) can also provide to the foreign investors scale economies similar to the countries with large domestic market. Thus, trade openness to global market might significantly determine the inflow of FDI. Probably, due to openness, a few small economies, such as Hong Kong and Singapore receive substantial amount of FDI (UNCTAD, 2009).
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Empirical Analysis and Forecast of Electricity Demand in West African Economic and Monetary Zone: Evidence from Panel ADRL Modelling

Empirical Analysis and Forecast of Electricity Demand in West African Economic and Monetary Zone: Evidence from Panel ADRL Modelling

constitute the demand of resident particular people such as households, private persons, organizations and professionals (Thioune, 2015). Since then, analysis about electricity demand is at the chore of energetic debates all around the world and interest a great number of economists. Those latter seek generally to analyze the determining elements of electricity demand or the energetic efficiency; to find the optimal price scale in the electricity domain and to analyze the link that exists between electricity consumption and economic growth. If the consumption of electric energy represents so much interest in economic analysis, that is surely because of its great importance in the world development process since the industrial revolution at the end of the eighteenth century. In fact, the industrial revolution is characterized by a tremendous acceleration of the economic growth, the consumption rate and so on. Those facts deeply overwhelm Western Europe countries (Thioune, 2015). According to Hounkpatin (2013) the available electric energy in sufficient quantity and quality in a given country constitute a determinant factor of its economic and social development; it brings comfort and well-being in households, favors the artisanal development of Small and Medium size Business (SMB) and industries. It also favors the development of administration services along with agriculture and that all allowing a very interesting economic growth of the country in balance with its population growth. Unfortunately, it is evident enough to remark that until today, access to electricity remains a major problem in Africa, though the continent overflows with enormous potentials in natural resources. A survey from the African Development Bank (ADB) shows that around 39% of total energy consumed in sub-Saharan Africa is imported against 19% of world average (African Development Bank Group, 2006) Moreover, sub-Saharan Africa has got the world lowest electrification rate with only 26% International Energy Agency (IEA) (2006) and Wolde-Rufael (2009). Especially in West Africa, just as agricultural raw products, energetic resources are very abundant and they should have been contributing to the improvement of people’s well-being. Among those resources we can quote petrol, natural gas, an excellent potential in hydraulic, solar and wind-powered energies. That is what is called mix-energetic.
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Accumulation of Foreign Exchange Reserves and Long Term Growth

Accumulation of Foreign Exchange Reserves and Long Term Growth

economies are also famous for high and rapidly growing international reserves: China and Japan accounted in 2005 for over 1/3 of total world FER, East Asia - for over half; reserves to GDP ratio for these countries is normally above 20% as compared to below 10% for the world as a whole. Similar arguments were made with respect to transition economies. Hölscher (1997) believes that EE countries can gain from underpricing their national currencies drawing on the West German experience with undervalued mark in the 1950s. Pomfret (1997) argues that undervalued exchange rate in China during the reform period (since 1978) was the powerful factor of stimulating economic growth. Some scholars concluded that the overvaluation of the Russian ruble in 1996-98 was the major reason of the Russian 1998 currency crisis (Illarionov, 1999; Montes and Popov, 1999; Popov, 1998a; Shmelev, 1999). Indeed, unlike in East Asian countries, where economic recession followed devaluation, the reduction of output in Russia started nearly a year before the devaluation of the ruble in August 1998; one month after devaluation output started to grow. Rodrik (1986) developed a model demonstrating how disequilibrium exchange rate in the presence of foreign trade externalities could lead to the acceleration of growth 3 . It was shown for developing countries that overvaluation of the exchange rate is detrimental for economic growth by including the variable that characterizes the undervaluation of the exchange rate into standard growth regressions (Dollar, 1992; Easterly, 1999).
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Analysis of Convergence Criteria in a Proposed Monetary Union:  A Study of the Economic Community of West African States

Analysis of Convergence Criteria in a Proposed Monetary Union: A Study of the Economic Community of West African States

In recent times and as a consequence of the successful emergence of the Euro as the single currency of the European Union, there has been renewed global interest in economic and monetary integration as means of facilitating economic growth and development. Other regions are attempting to emulate the European Union by setting up institutional frameworks and establishing processes of convergence similar to that of the EU as prerequisites for wider monetary integration. Monetary integration is considered important in international economic relations because it plays important roles in the addressing of the problems of multiplicity of currencies and exchange rate regime that often hinders trade flows between countries. The expected benefits of such a union include promotion of trade; creation of larger market and widening of business/trade-related income-earning opportunities for the citizenry for improvement of their standard of living; facilitation of unhindered movements of persons and labour in the sub-region through dismantling of barriers, thereby strengthening cultural, economic, social and political cooperation (common central bank, judiciary, parliament, etc); creation of a more favourable environment for collective pooling of resources for development of essential regional infrastructure and enhancement of economic competitiveness, derivation of economics of scale, and reduction in transactions costs (Sanusi, 2003; Qureshi and Tsangarides, 2006).
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Past and Current European Monetary Union Crises: Lessons for the Envisaged West African Monetary Union

Past and Current European Monetary Union Crises: Lessons for the Envisaged West African Monetary Union

Thirdly, although ECOWAS countries are unevenly distributed in terms of human and physical resources, the BLEU and EMU experiences have shown that both larger and smaller economies can operate under a common monetary framework. Therefore, the fear of the dominance of larger economies over weaker ones should not deter the process and structures already put in place. This implies that ECOWAS countries can foster real convergence by operating a common monetary policy if they are really committed. Fourthly, the ECOWAS Central Bank will likely commit itself to maintaining low interest rates just as the ECB prior to the EMU banking crisis. This certainly will encourage smaller nations to easily access funds that will increase their level of competitiveness and also give larger economies a leverage to boost their economic prowess. However, the process should be void of excessive borrowing and financial irresponsibility, since this will reduce the risk of increasing member countries’ budget deficits thereby curtailing any eventual debt crisis. This is critical for ECOWAS, if finally the common Central Bank is borne.
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Spillover Effects of Budgetary Policies in Monetary union: The Case of West African Economic and Monetary Union

Spillover Effects of Budgetary Policies in Monetary union: The Case of West African Economic and Monetary Union

In the case of WAEMU, the results confirm the structural heterogeneity of the economies. The single monetary policy is likely to be counter-cyclical in some countries and pro-cyclical in other countries, so this leads to conclude that there is a need to integrate heterogeneity into monetary rules. It must also be present in the process of budgetary arrangements to enable a proper allocation of the costs and benefits of belonging to a monetary union. At this level, it is desirable to design, for each WAEMU country, an optimal budget threshold corrected for cyclical effects. Indeed, these countries are exporters of raw materials (cotton, coffee, cocoa, groundnuts) and their budgetary balances are very sensitive to cyclical developments in world prices (exogenous shocks).
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Economic Growth, Foreign Direct Investment and International trade, in 10 West African Countries

Economic Growth, Foreign Direct Investment and International trade, in 10 West African Countries

a direct result of international trade and the momentous role of foreign direct investment. Owed to absolute and comparative advantage, and product differentiating, its ideal and typical for countries to engage in international trade, not only for the intensification of their consumption basket, but also to expand and strengthen their economic growth through international capital inflows, transfer of technology, skilled labour and competitive domestic markets (Ignatius A. et al, 2018). Foreign direct investment (FDI) has exhibited an important role in innumerable economies of Africa and other developing countries. There is a rife acceptance amongst investors, trade economics and policymakers that foreign direct investment (FDI) improves the productivity of the receiving countries and encourages development and growth.
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Macroeconomic Determinants of Foreign Direct Investment in WAEMU Countries: The Place of Electronic Communication

Macroeconomic Determinants of Foreign Direct Investment in WAEMU Countries: The Place of Electronic Communication

In order to contribute in boosting Foreign Direct Investment (FDI) in the West Afri- can Economic Monetary Union (WAEMU) countries, this article aims to empirically establish the role of various macroeconomic determinants in attracting FDI by fo- cusing specifically on electronic communication. The empirical estimates are based on panel data covering the period 1996-2014. These data come from United Nations Conference on Trade and Development (UNCTAD) and World Development Indica- tors (WDI) databases. Inspired from Arellano-Bond methodology, we estimate a fixed effects model for the sake of analysis. From the results, the electronic communication appears to be non-determinant for the attraction of FDI in the WAEMU countries. This result may be explained by the considerable level of electronic communication development prevailing currently in the union. In addition, it appears that economic dynamism captured through the gross domestic product, the weight of international trade and natural resources are the current key factors for attracting FDI in the un- ion. Moreover, the increase in government spending tends to oust FDI.
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Does bad company corrupts good character? A spatial econometric analysis of oil resource management in Africa

Does bad company corrupts good character? A spatial econometric analysis of oil resource management in Africa

Africa’s growth has been punctuated by social and economic tensions, conflicts, corruption and global economic events (AEO, 2013). Despite these challenges, Africa recorded a growth rate of 6.6% in 2012, dropping to 4.8% in 2013 and projected to be 5.3% in 2014. This growth has principally been driven by high prices of commodities such as oil. Similar to the studies of Sachs and Warner (1995) and Yaduma et al (2013), this research uses vital determinants of economic growth, including trade openness, oil revenues and investment, as well as governance indicators, such as corruption and institutional quality. Institutional quality is proxied by the polity index. It is assumed that the oil curse is more pronounced in countries with poor institutional frameworks than in countries with quality institutions (Boschini et al. 2007). Indeed, investment in productive sectors and rent-seeking activities compete for oil revenues in countries with poor institutions. According to Mehlum et al. (2006), the prudent management of oil revenues in Norway and the US can be attributed to well-defined property rights and good quality and transparent institutions. On the other hand, dysfunctional institutions which promote rent-seeking behaviour have been cited as a key cause of poor management of oil revenues in Nigeria and Venezuela (Lane and Tornell, 1999).
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The Economic Community of West African States : a study in political and economic integration

The Economic Community of West African States : a study in political and economic integration

a The "Treaty" means the Treaty of the Economic Community of West African States; b The "Community" means the Economic Community of West African States and it includes the Fund for Coope[r]

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Effects of the 2008 Financial Crisis on the Determinants of Foreign Direct Investments in the West African Economic and Monetary Union (WAEMU): A Panel Data Approach

Effects of the 2008 Financial Crisis on the Determinants of Foreign Direct Investments in the West African Economic and Monetary Union (WAEMU): A Panel Data Approach

The economic globalization has two dimensions: actual economic flows and restrictions to trade and capital. The sub-index on actual economic flows in- cludes data on trade, FDI, and portfolio investment. The sub-index on restric- tions takes into account hidden import barriers, mean tariff rates, taxes on in- ternational trade (as a share of current revenue), and an index of capital con- trols. The degree of political globalization is determined by the number of em- bassies and high commissions in a country, the number of international organi- zations to which the country is a member, the number of UN peace missions a country participated in, and the number of treaties signed between two or more states. And finally, social globalization has three dimensions: personal contacts, information flows, and cultural proximity. The sub-index on personal contacts includes international telecom traffic, degree of tourism, transfers, foreign pop- ulation, and number of international letters. The sub-index on information flows includes number of internet users, share of households with a television set, and trade in newspapers. The sub-index on cultural proximity includes trade in books and number of McDonald’s restaurants and Ikea located in a country.
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An alternative reconsideration of macroeconomic convergence criteria for West African Monetary Zone

An alternative reconsideration of macroeconomic convergence criteria for West African Monetary Zone

2001 to 2005, with a peak of 3.22 per cent in 2003. Perhaps, the main reasons for this low level of trade relations include the use of multiple inconvertible currencies within the Zone, the narrowness of tradable products in member countries, existence of tariff and non-tariff barriers to trade, multiple borders among the countries, and poor regional transportation infrastructure. These fundamental reasons had very little to do with macroeconomic convergence as it cannot stimulate trade relations except ex ante actions are taken in that direction through regional integration which includes ultimately a monetary union. One of the main objectives of creating the WAMZ is to promote trade among the members. Apart from the single currency agenda, other important elements of the program include the removal of tariff and non-tariff barriers to trade through the implementation of the ECOWAS Trade Liberalization Scheme (ETLS), the adoption of a Common External Tariff (CET), and the implementation of the Interstate Road Transit Convention by the member states. The implementation of the above measures, together with the creation of a single economic space in the Zone through the monetary union and single currency, are expected to significantly increase the volume of intra-trade in the Zone. Table 2 show the total value of intra- ECOWAS total trade by all the countries according to sub regional groupings within the region. A comparison of the level of intra- ECOWAS trade shows that WAMZ countries trade less with other ECOWAS countries
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