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Interdépendance entre Politique monétaire et politique budgétaire au niveau de l4UEMOA
Abstract
Résumé
A l'aide d'un VAR Bayésien et d'une distribution a priori fondée sur l'approche de Litterman-Minnesota (1980, 1986), ce papier examine l'interdépendance des politiques monétaires et budgétaires au sein de l'Union économique et monétaire ouest-africaine. Les résultats révèlent, d'une part, la présence d'un effet mémoire dans les deux politiques, et d'autre part, un jeu de complémentarité qui découle d'un choc d'offre. L'efficacité des politiques monétaires et budgétaires doit donc prendre en compte le décalage temporel pour mieux intégrer ces deux dimensions.
Abstract
Using a Bayesian VAR and a distribution, a priori, based on the Litterman-Minnesota approach (1980, 1986), this paper examines the interdependence between monetary and fiscal policies in West African Economic and Monetary Union. The results reveal, on the one hand, the presence of a memory effect in the two policies, and on the other hand, a complementarity game resulting from a supply shock. The effectiveness of monetary and fiscal policies must therefore take into account the time lag in order to better integrate these two dimensions.
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In this paper, I propose an econometric technique to estimate a Markov-switching Taylor rule subject to the zero lower bound of interest rates. I show that incorporating a Tobit-like specification allows to obtain consistent estimators. More importantly, I show that linking the switching of the Taylor rule coefficients to the switching of the coefficients of an auxiliary uncensored Markov-switching regression improves the identification of an otherwise unidentifiable prevalent monetary regime. To illustrate the proposed estimation technique, I use U.S. quarterly data spanning 1960:1-2013:4. The chosen auxiliary Markov-switching regression is a fiscal policy rule where federal revenues react to debt and the output gap. Results show that there is evidence of policy co-movements with debt-stabilizing fiscal policy more likely accompanying active monetary policy, and vice versa.
Cet article propose une analyse descriptive des données macroéconomiques dans la zone euro et une étude de la transmission des politiques monétaire et budgétaire à travers une analyse SVAR. Les résultats suggèrent que, depuis la création de la zone euro, la politique monétaire a joué un rôle important aussi bien pour la stabilisation de l’inflation et de l’activité réelle, en ayant un comportement contracyclique soutenu. Au niveau agrégé, la politique budgétaire semble aussi avoir favorisé la stabilisation de l’activité réelle par des actions contracycliques (surtout après 2003). Cependant, des divergences importantes apparaissent au niveau national, mettant en cause l’efficacité de la gestion budgétaire dans l’Union économique et monétaire (UEM). L’étude de la transmission des différents chocs à l’intérieur de la zone confirme l’idée d’une certaine complémentarité entre politique monétaire commune et politiques budgétaires nationales. Elle met aussi en exergue l’hétérogénéité de la transmission des chocs au niveau national, preuve de la présence d’asymétries structurelles qui persistent dans cette région.
La théorie budgétaire du niveau des prix, soit en anglais la Fiscal Theory of the Price Level, (FTPL), a donné lieu à une intense littérature dans les années récentes1 (Leeper [1991], Sims [1994], Woodford [1994, 1995, 1996, 1998, 1999 et 2000], Canzoneri et alii [1998], Cochrane [1999, 2000], Christiano et Fitzgerald [2000], et, de façon critique, McCallum [1998] et Buiter [1998, 1999, 2000]). Cette littérature présente plusieurs particularités curieuses. Elle est purement théorique ; elle ne part d'aucun fait empirique observé ; elle n'a aucune application pratique ; elle n'a aucun retentissement dans le débat public de politique économique. Il s'agit d'une pure scholastique puisqu'il s'agit d'étudier la détermination de l'inflation dans une économie sans autorités monétaires actives, à prix parfaitement flexibles (...).
We develop a model-based, VAR methodology for measuring innovations in monetary policy and their macroeconomic effects. Using
this framework, we are able to compare existing approaches to measuring monetary policy shocks and derive a new measure of
policy innovations based directly on (possibly time-varying) estimates of the central bank's operating procedures. We also
propose a new measure of the overall stance of policy (including the endogenous or systematic component) that is consistent
with our approach.
If dynamic multivariate models are to be used to guide decisionmaking, it is important that probability assessments of forecasts or policy projections be provided. When identified Bayesian vector autoregression (VAR) models are presented with error bands in the existing literature, both conceptual and numerical problems have not been dealt with in an internally consistent way. In this paper, the authors develop methods to introduce prior information in both reduced-form and structural VAR models without introducing substantial new computational burdens. Their approach makes it feasible to use a single, large dynamic framework (for example, twenty-variable models) for tasks of policy projections. Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Countries have significantly increased their public-sector borrowing since the Global Financial Crisis. As a consequence, monetary authorities may face pressure to deviate from their policy targets in ways designed to ease the debt burden. In view of this consideration, we test for greater fiscal dominance over 2000-2017 under Inflation Targeting (IT) and non-IT regimes. We find that evidence of fiscal dominance varies across countries and debt configurations. Higher ratios of public debt-to-GDP may appear associated with lower policy interest rates in advanced economies. However, a declining natural rate of interest largely explains the pattern of lower rates and higher debt in these countries. The most robust evidence of fiscal dominance lies among emerging markets under non-IT regimes, composed mostly of exchange rate targeters. For these countries, policy interest rates are non-linearly associated with public debt levels, depending on both the level of hard-currency public debt-to-GDP and the currency composition of public debt. We also show that emerging market economies with greater exchange rate volatility, inflation volatility, and underlying commodity exposure exhibit stronger associations between public debt and policy interest rates.
If the government's willingness to stabilize debt is waning, while the central bank is adamant about keeping inflation low, the economy enters a vicious spiral of higher inflation, monetary tightening, recession, and further debt accumulation. The mere possibility of this conflict represents a drag on the economy. A commitment to inflate away the debt accumulated during a large recession leads to welfare improvements and lower uncertainty by separating long-run fiscal sustainability from the short-run fiscal stimulus. This strategy can be used to avoid the zero lower bound. As a technical contribution, we explain how to build shock-specific policy rules.
This article examines the main integration trends of the state's monetary and fiscal policy in influencing economic growth and maintaining the sustainability of public debt. It is argued that the relationship between these trends of macroeconomic regulation is predetermined, on the one hand, by the potentially negative impact of fiscal expansion from the point of view of inflation, and by the negative impact of a likely state default in failing to refinance the debt from the Ministry of Finance, on the other hand. The paper studies the selected array of statistical data using the fiscal policy multipliers concept, the relationship between the effect of increase/decrease in budget expenditures, the slowdown in economic activity and the efforts by the Central Bank to offset fiscal measures, on the one hand, and the ratio of an increase/decrease in budget revenues and debt expenditures used to finance the budget investments, on the other hand. It is revealed that the investments are effective if implementing budget expenditures in the presence of the GDP gap and unrealized expectations of economic agents, while reducing spending in such a situation will intensify the recession. The GDP growth determined by these investments should provide the tax effect sufficient to cover the expenses. Otherwise, there can be negative effects of debt that establishes the need for measures to refinance public debt by the Central Bank. The conclusions of the paper can be used to assess the possible integration of monetary and fiscal policy based on various states.
The Policy Mix in WAEMU : Lessons from Yesterday, Reflections for Tomorrow
More than fifteen years after the creation of the West African Economic and Monetary Union and in the year of the fiftieth anniversary of the West African Monetary Union, it seems advisable to make an assessment of the connection between the common monetary policy, whose implementation is within the competence of the West African States Central Bank (BCEAO) that is responsible for the management of the CFA franc, and the WAEMU Commission which is entrusted with the coordination of national budgetary policies. A close examination shows that the goal of economic growth was sacrificed in the fight against inflation. Finally, it would be useful to improve WAEMU’s Policy Mix and move towards a more flexible FCFA/Euro parity and an economic Government established on a fiscal federalism that needs to be promoted.
The impact of exchange rate regimes on domestic and foreign investment in the presence of a short-run Phillips curve is investigated. Producers may diversify internationally to increase the flexibility of production, thereby diversifying country-specific productivity and monetary shocks. Aggregate investment is shown to be higher under a fixed exchange rate than under a flexible exchange rate for both productivity and monetary shocks. Welfare is not, however, necessarily higher under either regime: a flexible exchange rate stabilizes employment in the presence of real shocks at the cost of reduced expected GNP and investment.
How do fiscal authorities behave and how do they interact with the national monetary authorities? Pooled data for the 15 members of the European Union except Luxembourg and five other OECD countries serve in an attempt to answer. Three basic conclusions emerge. First, fiscal policy responds to the ratio of public debt to output in a stabilizing manner. Second, coordinated macroeconomic policy exists: easier fiscal policy leads to tighter monetary policy, and easier monetary policy to tighter fiscal policy. Third, fiscal policy responds in a stabilizing manner to the cycle, but automatic stabilization through fiscal policy is much weaker than generally perceived. While expansion raises tax receipts, it also raises government expenditures. This last result, which is clearly the most surprising in the study, is also very robust and raises doubts about the extent of stabilization that country members of EMU can expect to get automatically.
Is fiscal coordination a necessary complement of EMU Enlargement? Or may enlargement of the Monetary Union be an efficient substitute for fiscal coordination? In a simple monetary-fiscal policy game, Monetary Union enlargement has two opposite effects: 1) Optimal inflation is higher on average, and welfare is lower with decentralized fiscal policy than with centralized fiscal policy. Moreover, when fiscal policies are decentralized, they inefficiently react to supply symmetric shocks, which again reduces welfare. Enlargement of the Monetary Union exacerbates these two problems and increases fiscal coordination benefits. 2) Nevertheless, enlargement of the Monetary Union decreases the fiscal authorities' temptation to resort to "beggar thy neighbor" policies when asymmetric demand shocks arise, and thus may constitute a good substitute for fiscal coordination.
Structural VAR modeling has played an important role in empirical macroeconomics. The importance sampler used in the existing literature, however, can be prohibitively inefficient for obtaining accurate finite-sample inferences. In this paper we develop a Gibbs sampler for Bayesian inferences of structural VARs that restrict the covariance matrix of reduced-form residuals. Our method is computationally efficient in comparison to the existing method and can be readily applied. We show, by examples, that inferences based on the importance sampler can seriously distort economic interpretations.
We consider the interaction between the monetary policy in a monetary union, and the separate fiscal policies of the member countries. We use a Barro–Gordon-type model extended to many countries and fiscal policies. Each country’s fiscal policies inflict externalities on other countries, and the common monetary policy has its time-consistency problem. But if the two types of policymakers agree about the ideal levels of output and inflation, then this ideal is attained despite disagreements about the weights of the objectives, despite ex post monetary accommodation to fiscal profligacy, without fiscal coordination, without monetary commitment, and for any order of moves.
Policy mix problems may arise in a currency union like the EMU since monetary policy (targeting inflation) is centralized and fiscal policy (targeting output) is decentralized. This issue is considered in a setting allowing for various cross-country interdependencies and types of shocks (demand/supply; aggregate/idiosyncratic). An inappropriate stabilization of shocks arises, and fiscal policy is too counter-cyclical when shocks are aggregate, but insufficiently counter-cyclical for idiosyncratic shocks. The stabilization bias is increasing in the number of fiscal decision makers when shocks are aggregate, but decreasing for idiosyncratic shocks. Numerical illustrations show that the cost of non-cooperative fiscal policies is higher for aggregate than for idiosyncratic shocks.
This paper addresses the optimal joint conduct of fiscal and monetary policy in a two-country model of a currency union with staggered price setting and distortionary taxes. A tractable linear-quadratic approximation permits a representation of the optimal policy plan in terms of targeting rules. In the optimal equilibrium, monetary policy should achieve aggregate price stability following a flexible inflation targeting rule. Fiscal policy should stabilize idiosyncratic shocks allowing for permanent variations of government debt but should abstain from creating inflationary expectations at the union level. Simple policy rules can approximate the optimal commitment benchmark through a mix of strict inflation targeting and flexible budget rules. Conversely, the welfare costs of balanced budget rules are at least one order of magnitude higher than conventional estimates of the costs of business cycle fluctuactions.
It is currently popular to identify monetary policy shocks with innovations in some measure of reserves or in the federal funds rate. These assumptions about the interest elasticity of the supply of or demand for reserves imply monetary policy shocks that produce dynamic responses of macroeconomic variables that are anomalous relative to traditional monetary analyses. This paper tentatively identifies supply and demand shocks in the markets for reserves and M2 for the 1980s and contrasts them with results for the 1970s. In the later period, identified monetary policy shocks have dynamic impacts that are fully consistent with traditional analyses. Copyright 1994 by University of Chicago Press.
The paper examines consolidation episodes in the EU since 1970 with a view to shedding light on the factors that determine the success or failure of fiscal adjustment. Compared to the existing literature on successful fiscal consolidations we add a number of new dimensions. Two deserve particular attention. Firstly, we explore a broader set of potential ingredients of the recipe for success.� In addition to the composition of adjustment, which has extensively been examined in the literature, we consider further elements such as the quality and strength of fiscal governance and the implementation of structural reforms. Secondly, our analysis seeks to differentiate between at least two different types of consolidation episodes, one in which a relatively big fiscal correction is implemented in a short period of time, dubbed 'cold shower' consolidation, as compared to more gradual episodes of adjustment. Such a differentiation is motivated by the conjecture that the recipe for success may be conditional on the type of adjustment chosen.� Our analysis broadly confirms the results established in the literature for what concerns (i) the conditions triggering a consolidation episode and (ii) the composition of adjustment, with minor but important qualifications related to the role played by government wages. In addition it provides evidence that well-designed fiscal governance as well as structural reforms improve the odds of both starting a consolidation episode and achieving a lasting fiscal correction
Replaced by Working Paper 274 (July 1985)
In this article, Christopher A. Sims argues the answer to his title is yes. Sims explains that any decisionmaking model must incorporate some identifying assumptions to enable it to forecast the effects of alternative decisions. He argues that although all identifying assumptions in econometric policymaking models are of uncertain validity, those incorporated in vector autoregression (VAR) forecasting models have the advantage of allowing their uncertainty to be measured. Sims concludes by demonstrating a method for identifying a small macroeconomic VAR model so that it can be used to analyze monetary policy
The article analyses in a simple setting a game between an inflation-conservative central bank and a fiscal authority subject to an upper limit on the budget deficit. It is shown that complementarity or substitutability between the policies and the preference of each authority for the other authority's behaviour crucially depends on the type of shock hitting the economy. If the government attempts to stimulate output beyond its natural level, a ‘deficit bias’ emerges under non-co-operation; under co-operation, the equilibrium is characterized by both a ‘deficit bias’ and an ‘inflation bias’. However, if the government only pursues cyclical stabilization these biases disappear and there are positive gains from co-ordinating the policy responses to shocks.
This paper assesses how monetary authorities behave and how they interact. Pooled data for the 15 members of the European Union except Luxembourg and five other OECD countries serves to answer these questions. Three basic conclusions emerge. First, fiscal policy responds to the ratio of public debt to output in a stabilizing manner. Second, coordinated macroeconomic policy exists: easy fiscal policy leads to tight monetary policy, and easy monetary policy to tight fiscal policy. Third, both monetary and fiscal policy respond to the cycle in a stabilizing manner, but automatic stabilization through fiscal policy is much weaker than generally perceived. Expansion raises tax receipts but also government expenditures. The destabilizing response on the expenditure side is also extremely marked.
The paper decomposes GDP both in terms of level per capita and growth rate, so as to identify the sources of income differences and of economic growth for all EU27 member states. This accounting approach has multiple advantages, although a number of substantial caveats should be borne in mind when interpreting the results. In particular, the detailed accounting approach helps distinguish exogenous from policy-influenced growth drivers. The combination of lower per-hour productivity and lower labour utilisation is the cause of relatively low per capita GDP in euro area and EU15 countries, while weak productivity remains the main concern in the new member states. GDP growth rate has been broken down into 12 items, including an indicator of labour quality, based upon the composition of employment by educational attainment.
Modernizing the monetary policy framework and its transmission in the WAEMU
IMF, (2021), "Modernizing the monetary policy framework and its
transmission in the WAEMU", Washington, D.C.
Building Integrated Economies in West Africa: Lessons in Managing Growth, Inclusiveness, and Volatility
- Alexei Kireyev
Kireyev, Alexei, (2016), "Building Integrated Economies in West
Africa: Lessons in Managing Growth, Inclusiveness, and Volatility",
Washington, D.C.
« L'impact des politiques monétaires et budgétaires sur la croissance économique dans les pays de l'UEMOA », Revue d'Etudes Et Recherches N°509, décembre
- S Kone
Kone, S., (2000), « L'impact des politiques monétaires et budgétaires
sur la croissance économique dans les pays de l'UEMOA », Revue
d'Etudes Et Recherches N°509, décembre, p. 3.
Analyse de l'interaction des politiques budgétaire et monétaire au sein de l'Union Economique et Monétaire Ouest Africaine
- S F Sira
Sira, S. F., (2010.), Analyse de l'interaction des politiques budgétaire
et monétaire au sein de l'Union Economique et Monétaire Ouest
Africaine, Université de Rennes 1, Novembre 2010.