TITLE:
Heterogeneity of Debt Policies of WAEMU Countries: Convergence or Disparity of Economies
AUTHORS:
Ibrahima Diallo
KEYWORDS:
Debt Policies, Convergence, Heterogeneity, WAEMU
JOURNAL NAME:
Modern Economy,
Vol.11 No.2,
February
25,
2020
ABSTRACT: The impact of monetary policy on economic activity
in integrated currency areas may be affected by factors that are primarily
related to the convergence of economic structures and fiscal policies. In
economic analysis, convergence is used to characterize the process of
reconciling economies with respect to certain macroeconomic variables. This
notion could involve both real and nominal convergences. Our methodology is
inspired by the work of Diarra (2016) and in keeping with the spirit of multilateral
surveillance, which consists of judging the performances of the states with
respect to the criteria. A modification was made to the convergence sigma
technique. This modification involved estimating the deviation from the norm
only if it is not respected. If the standard is respected, we consider that the
difference is nil. The analysis of the convergence sigma reveals a
heterogeneity of WAEMU country behaviour in the convergence process. This state
of affairs is explained by structural differences. Economies react differently
when they are affected by asymmetric shocks. Because fiscal policy is the only
stabilization instrument, it reflects the divergence of preferences in economic
policy. The results show that the disparities in WAEMU economies are related to
the asymmetric shocks affecting them and to the structural heterogeneity that
results in non-cooperative
use of budget instruments.