Twin Deficits Phenomenon in the West African Economic and Monetary Union Countries: Panel Data Analysis

Author
Kouassi Yeboua
Content Type
Research Paper
Institution
African Economic Research Consortium (AERC)
Abstract
For a long time, the West African Economic and Monetary Union (WAEMU) countries have been experiencing persistently high budget and current deficits. This study was undertaken to empirically test the “Twin Deficits Hypothesis” in these countries. The analysis was conducted within the framework of the Panel Vector autoregressive (VAR) approach over the period 1975–2013. In contrast to the conventional view which claims a one-way relationship between budget and current account deficits, the results show that budget deficits lead to a deterioration in the current account balance, and vice versa (bilateral relationship). We also found that budget deficits have an impact on current account balance mainly through imports.
Topic
Economics, Monetary Policy, Budget, Economic Policy, Macroeconomics
Political Geography
Africa, West Africa