Fiscal Sustainability and Growth Dynamics in West African Monetary Zone (WAMZ)

Joseph Ayoola Omojolaibi and Monday Kingsley Oserei

Abstract

Fiscal sustainability is very important for macroeconomic stability, monetary policy effectiveness and the pursuit of economic growth. The current study accesses fiscal sustainability and growth dynamics in West Africa Monetary Zone (WAMZ). The literature on the issue of public debt considers it sustainable if the growth of debt is not greater than the growth of Gross Domestic Product (GDP). The study applies Panel data using the Hausman Test, Cointegration and Granger Causality methodologies were also used to evaluate fiscal processes in these WAMZ countries. A model for testing the sustainability of fiscal policy was also developed, based on the Intertemporal budget constraint while the outcome shows that fiscal policy in WAMZ countries is weakly sustainable which led to the recommendation that WAMZ countries should strengthen their fiscal performance.

Keywords: Fiscal Sustainability, Growth Dynamics, WAMZ, Panel Data Estimation,

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