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The stance of fiscal policy in CEMAC and WAEMU is strongly influenced by fiscal effort in the previous period. This persistence underscores the risks of a procyclical fiscal policy stance, given these countries' high degree of dependence on primary commodities and exposure to terms of trade shocks. This paper finds that the coefficient of the lagged debt stock was significant and positive, consistent with the theory that higher levels of debt warrant greater fiscal effort. Various measures of economic performance, as captured by economic growth and per capita GDP, openness, and the terms of trade were also found to be important factors in explaining fiscal performance. As fiscal performance seems to be strongly affected by both real GDP growth and terms of trade fluctuations, there appears to be a need to develop supplementary fiscal-related criteria that take into account the influence of output and the terms of trade.

Exports and Imports --- Macroeconomics --- Public Finance --- Fiscal Policy --- Empirical Studies of Trade --- Debt --- Debt Management --- Sovereign Debt --- Financial Aspects of Economic Integration --- International economics --- Public finance & taxation --- Fiscal stance --- Terms of trade --- Public debt --- Fiscal policy --- Monetary unions --- Economic policy --- nternational cooperation --- Debts, Public --- Central African Republic --- Monetary policy --- Franc, CFA --- Africa, French-speaking --- Economic policy. --- Nternational cooperation

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We apply the fundamentals equilibrium exchange rate (FEER) approach and the Johansen cointegration methodology to investigate the behavior of the real effective exchange rates of the two monetary unions of the CFA franc zone (CEMAC and WAEMU) vis-à-vis their long-run equilibrium paths. For both CEMAC and WAEMU, our results indicate that: (i) the fundamentals account for most of the fluctuation of the real effective exchange rates, with increases in the terms of trade, government consumption, and productivity improvements causing the exchange rate to appreciate, and increases in investment and openness leading to a depreciation; (ii) at end-2005 both the CEMAC and WAEMU real effective exchange rates were broadly in line with their long-run equilibrium values; and (iii) following a shock, reversion to equilibrium is twice as fast in WAEMU than in CEMAC.

Electronic books. -- local. --- Foreign exchange rates -- French franc area. --- Franc, CFA. --- Monetary unions -- Africa, French-speaking. --- Finance --- Business & Economics --- International Finance --- Foreign exchange rates --- Monetary unions --- Common currencies --- Currency areas --- Currency unions --- Optimum currency areas --- CFA franc --- Colonie française d'Afrique franc --- Communateé financière africaine franc --- Communauteé financère d'Afrique franc --- Exchange rates --- Fixed exchange rates --- Flexible exchange rates --- Floating exchange rates --- Fluctuating exchange rates --- Foreign exchange --- Rates of exchange --- Rates --- Currency question --- Money --- French franc area --- Econometrics --- Foreign Exchange --- Macroeconomics --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- State Space Models --- Forecasting and Other Model Applications --- Open Economy Macroeconomics --- Macroeconomics: Consumption --- Saving --- Wealth --- Currency --- Econometrics & economic statistics --- Real effective exchange rates --- Real exchange rates --- Vector autoregression --- Government consumption --- Econometric analysis --- National accounts --- Consumption --- Economics --- Equatorial Guinea, Republic of