Effects of Fiscal and Monetary Policies on Economic Growth in the West African Monetary Zone (Wamz)

Abstract

The study sought to investigate both the linear and asymmetric effects of fiscal and monetary policies on economic growth in the West African Monetary Zone by employing the linear and non-linear Autoregressive Distributed Lag model (ARDL). Secondary data from 1990 to 2016, gathered from World Development indicators (WDI), the IMF international financial statistics was used. The study found that, linearly, in the case of WAMZ and member countries like Ghana, Gambia, Guinea, Nigeria but not Sierra Leone, economic growth is positively influenced by government expenditure, money supply and real exchange rate while negatively influenced by real interest rate, inflation rate and tax revenue. Asymmetrically, growth respond more to an upward shift in government expenditure and real interest rate for the zone, Sierra Leone, Gambia and Nigeria; and respond more to positive changes in tax revenue and money supply in Ghana and Sierra Leone but not WAMZ. Also, the economic growth of all the member countries respond more to an increase in inflation. It is therefore recommended that, WAMZ as well as countries such as Ghana, Gambia, Guinea, and Nigeria should implement suitable measures tailored towards expanding government expenditures. Finally, it is recommended that, both policies should be coordinated effectively for WAMZ and its members as well to ensure sustainable growth