Inflation and Public Debt Reversals in the West African Monetary Zone (WAMZ) Economies

Article DOI: https://doi.org/10.57017/jaes.v18.2(80).03

Author(s):

Yaya CHAM West African Monetary Institute (WAMI), Accra, Ghana

Abstract:

The research focused on the causes of inflation and public debt reversal in the West African Monetary Zone (WAMZ) economies. Several factors influencing public debt reversal and inflation, including weak institutions, high government spending, influence from external shock and lack of proper revenue mobilisation. The impact of these factors on the WAMZ economies has also been examined as these countries suffer from high inflationary pressures, increasing borrowing costs and slow economic growth. Policies and other methods implemented by the WAMZ economies to address the challenges have also been evaluated. The last section of the research looks at the challenges these economies face in implementing the policy responses stipulated to address public debt reversals and inflation.

Copyright© 2023 The Author(s). This article is distributed under the terms of the license CC-BY 4.0., which permits any further distribution in any medium, provided the original work is properly cited.

How to cite:

Cham, Y. (2023). Inflation and Public Debt Reversals in the West African Monetary Zone (WAMZ) Economies, Journal of Applied Economic Sciences, Volume XVIII, Summer, 2(80), 84–91. https://doi.org/10.57017/jaes.v18.2(80).03

References:

[1] Abubakar, A., and Gani, I. M. (2013). Impact of banking sector development on economic growth: Another look at the evidence from Nigeria. Journal of Business Management & Social Sciences Research, 2, 47-57. https://www.academia.edu/6468850/Impact_of_Banking_Sector_Development_on_Economic_Growth_Another_Look_at_the_Evidence_from_Nigeria

[2] Ada, Mbah Stella, O. Agu, and Umunna, G. (2018). Impact of external debt on economic growth in Nigeria: An ARDL bound testing approach. Journal of Economics and Sustainable Development, 7(10), 16-26. https://core.ac.uk/reader/234647500

[3] Adeve, K. A., Karabou, E. F. (2022). Public debt and development sustainability issues in the West African Economic and Monetary Union (WAEMU). Cogent Economics & Finance, 10(1). https://doi.org/10.1080/ 23322039.2022.2079177

[4] Agri, Eneji Mathias, Mailafia, D., and Umejiaku, R. I. (2017). Impact of economic recession on macroeconomic stability and sustainable development in Nigeria. Science Journal of Economics. https://www.sjpub.org/sje/sje-130.pdf

[5] Ahmed, A.D. (2012). Debt burden, military spending and growth in Sub-Saharan Africa: A dynamic panel data analysis. Defence and Peace Economics, 23(5), 485–506. https://doi.org/10.1080/10242694.2011.627163

[6] Ajibola, J. O., and Onakoya. A .B. (2022). Single Currency Macroeconomic Fundamentals, and Economic Growth and Poverty in West African Monetary Zone, Christopher University Journal of Management and Social Sciences, 2(1).

[7] Ayesu, E., and Olaomi, J. (2021). The mediating effect of money growth and general public consumption in the fiscal deficit-inflation-growth nexus of the West African Monetary Zone: A multilevel structural model approach. Preprint. https://doi.org/10.21203/rs.3.rs-783426/v1

[8] Babalola, A. (2015). Fiscal policy and economic development in Nigeria. Journal of Economics and Sustainable Development, 6(7): 150–159. https://core.ac.uk/download/pdf/234646971.pdf

[9] Blommestein, H. J., and Turner, F. (2011). Interactions between Soverign Debt Management and Monetary Policy Under Fiscal Dominance and Financial Instability. https://papers.ssrn.com/sol3/ papers.cfm?abstract_id=1964627

[10] Ceesay, E. K., Tsenkwo, J. B., and Fanneh, M. (2019). Debt and growth: Different evidence from the Western African countries. Central Asian Review of Economics and Policy, 1(2): 19–26. https://doi.org/10.15604/carep.2019.01.02.002

[11] Chugunov, I., Pasichnyi, M., Korovity, V., Kaneva T., Nikitishin, A. (2021). Fiscal and monetary policy of economic development. European Journal of Sustainable Development, 10(1), 42. https://doi.org/10.14207/ ejsd.2021.v10n1p42

[12] De Soyres, C., Kawai, R., and Mengxue Wang, M. (2022). Public debt and real GDP: Revisiting the Impact, IMF Working Papers. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4103992

[13] Dey, S. R., Tareque, M. (2020). External debt and growth: Role of stable macroeconomic policies. Journal of Economics, Finance and Administrative Science, 25(50),185-204. https://doi.org/10.1108/jefas-05-2019-0069

[14] Edo, S. E., Osadolor, N. E., and Dading, F. I. (2020). Growing external debt and declining export: The concurrent impediments in economic growth of Sub-Saharan African countries. International Economics, 161: 173–187. https://doi.org/10.1016/j.inteco.2019.11.013

[15] Egbuna, N. E., Maimuna, J. S. et al. (2019). Public debt sustainability in The West African Monetary Zone, Working Papers, 17, West African Monetary Institute. https://ideas.repec.org/p/wam/wpaper/17.html

[16] Englama, A., Tarawalie, A. B., and Ahortor, C. R. K. (2014). Fiscal and monetary policy coordination in the WAMZ: Implications for member states performance on the convergence criteria. Private sector development in West Africa. Cham: Springer, 61-94. https://link.springer.com/chapter/10.1007/978-3-319-05188-8_3

[17] Ezema, D., Onuzurike, E. (2020). Implications of economic diversification for sustainable development in Nigeria: Lessons from Covid-19 Pandemic. International Journal of Research in Humanities and Social Studies, 7(9), 11–16. http://www.ijrhss.org/papers/v7-i9/2.pdf

[18] Faramoti, J. O., and Omolade, A. (2022). Impact of monetary policy transmission mechanism in West African Countries. Studia Universitatis Vasile Goldiş, Arad-Seria Ştiinţe Economice, 32(1): 20-42. https://doi.org/10.2478/sues-2022-0002

[19] Ikue, N. J., Amabuike, I. L., Ajaba, J. A., Sodipo, J. A., and Enegesi, L. B. (2020). Financial system, trade concentration and economic growth in West African Monetary Zone (WAMZ). International Journal of Research in Business and Social Science, 9(4): 426–436. https://doi.org/10.20525/ijrbs.v9i4.770

[20] Iliyasu, I., and Muhammed, I. (2023). Growth effects of government expenditure in Nigeria: Does the level of corruption matter? Asian Journal of Economics and Empirical Research, 10(1): 1–10. https://doi.org/10.20448/ajeer.v10i1.4406

[21] Jackson, E. A. (2018). Public debt management–theory & application. African Journal of Economic and Management Studies, 9(1): 126–128. https://doi.org/10.1108/AJEMS-06-2017-0147

[22] Jarju, I., Nyarko, E., Adams, K., Haffner, O., and Odeniran, O. S. (2016). Relationship between external debt and economic growth in the West African Monetary Zone: A panel data analysis. WAMI Occasional Paper Series. https://www.econstor.eu/handle/10419/264223

[23] Law, S. H., Ng, C. H., Kutan, A. M., and Law, Z. K. (2021). Public debt and economic growth in developing countries: Nonlinearity and threshold analysis. Economic Modelling, 98: 26–40. https://doi.org/10.1016/j. econmod.2021.02.004

[24] Meniago, C., and Asongu, S. A. (2018). Revisiting the finance-inequality nexus in a panel of African countries. Research in International Business and Finance, 46: 399–419. https://doi.org/10.1016/j.ribaf.2018.04.012

[25] Moseley, W. G., Carney, J., and Becker, L. (2010). Neoliberal policy, rural livelihoods, and urban food security in West Africa: A comparative study of The Gambia, Cote d’Ivoire, and Mali. Proceedings of the National Academy of Sciences, 107(13), 5774–5779. https://doi.org/10.1073/pnas.0905717107

[26] Mutenyo, J., and Asmah, E. E. (2010). Does foreign direct investment crowd-out domestic private investment in Sub-Saharan Africa? African Finance Journal, 12(1), 27–52.

[27] Mwakalila, E. (2020). Crowding out of private sector in Tanzania: Government expenditure, domestic borrowing, and lending rates. Emerging Economy Studies, 6(1), 123–135. https://doi.org/10.1177/2394 901520913653

[28] Ndombi Avouba, Fabrice-Gilles, A. IBN-Saïd Akougbe, and Christel le Ines Leticia Ndombi Ondze. (2021). Non-linearity between financial inclusion and economic growth in Sub-Saharan Africa: What implications for the West African Economic and Monetary Union (WAEMU), Cogent Economics & Finance, 11(1), 2158630. https://doi.org/10.1080/23322039.2022.2158630

[29] Nwakoby, I. C., and Ezeaku, H. C. (2021). Effects of concessional debt on economic development: a multilateral and bilateral perspective on the West African monetary zone. European Journal of Economic and Financial Research, 5 (2). http://dx.doi.org/10.46827/ejefr.v5i2.1104

[30] Okafor, H. O. (2013). Estimating the costs and benefits of a common currency for the second West African Monetary Zone (WAMZ). Journal of Economics and Behavioral Studies, 5(2), 57–68. https://doi.org/10.22610/ jebs.v5i2.380

[31] Omojolaibi, J. A., Tochi-Nze P. Okenesi, and Ekundayo P. Mesagan. (2016). Fiscal policy and private investment in selected West African countries. CBN Journal of Applied Statistics, Volume 7, 1(13), 277-309. https://dc.cbn.gov.ng/jas/vol7/iss1/13

[32] Orji, A., Uche, A. S. and Elijah Ayobami Ilori. (2014). Foreign capital inflows and growth: An empirical analysis of WAMZ experience. International Journal of Economics and Financial Issues, 4(4): 971-983. https://dergipark.org.tr/en/pub/ijefi/issue/31964/352067

[33] Oyelami, L. O., Olomola, P. A. and Ajisafe, R. A. (2016). Economic interdependence and macro-economic shocks synchronization in West African Monetary Zone member countries. International Economics Studies, 46(2), 69–84. https://doi.org/10.22108/ies.2019.113208.1043

[34] Ozekhome, H. O. (2017). Does money supply growth cause inflation in the West African Monetary Zone? West African Journal of Monetary and Economic Integration, 17(2), 57–80. https://www.econstor.eu/ handle/10419/264245

[35] Saka, J. O., Onafowokan, I. A., and Adebayo, A. A. (2015). Analysis of convergence criteria in a proposed monetary union: A study of the economic community of West African States. International Journal of Economics and Financial Issues, 5(1), 230–239. https://dergipark.org.tr/en/pub/ijefi/issue/31967/352120

[36] Salameh, H. (2020). The effect of sovereign debt on economic growth: The case of oil-rich countries. International Journal of Economics and Financial Issues, 10(2), 262-267. https://doi.org/10.32479/ijefi.9120

[37] Sasu, D. (2022). Annual consumer price inflation rate of countries in the Economic Community of West African States (ECOWAS) as of 2022. Statista. https://www.statista.com/statistics/1236461/annual-inflation-rate-of-ecowas-membercountries/#:~:text=Annual%20inflation%20rate%20of%20ECOWAS%20member%2 0countries%202022&text=The%20annual%20inflation%20rate%20of,of%209.9%20percent%20in%202022

[38] Senadza, B., Fiagbe, K., and Quartey, P. (2017). The effect of external debt on economic growth in Sub-Saharan Africa. International Journal of Business and Economic Sciences Applied Research (IJBESAR), 11(1), 61-69. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3155129

[39] Siddique, A., Selvanathan, E. A., and Selvanathan, S. (2016). The impact of external debt on growth: Evidence from highly indebted poor countries. Journal of Policy Modelling, 38(5): 874–894. https://doi.org/10.1016/j. jpolmod.2016.03.011

[40] Tama, H. J., and Sule, H. (2022). Impact of External Debt on Economic Growth in Nigeria: 1986-2019. American Journal of Economics and Business Innovation, 1(3), 55-72. https://doi.org/10.54536/ajebi.v1i3.570

[41] Tarawalie, A. B., and Jalloh, T. (2021). External debt and economic growth nexus in the ECOWAS: A threshold analysis. International Journal of Business and Economics Research, 10(5), 178-186. https://doi.org/10.54536/ajebi.v1i3.570