West African Economic And Monetary Union Research Articles

Heterogeneity effect of prudential regulation on the stability of banks: evidence from WAEMU banks using quantile regression with fixed effects

Purpose This paper aims to analyze the heterogeneous effect of prudential regulation on the stability of banks in the West African Economic and Monetary Union (WAEMU). Design/methodology/approach The author uses in this study individual bank data from balance sheets, income statements of banks in the WAEMU space and annual reports of the banking commission formed into a three-year panel from the period 2017 to 2019. First, this study uses hierarchical clustering based on specific banking characteristics to determine whether the WAEMU region’s banking markets are heterogeneous or not. Second, this study uses quantile regression approach with fixed effects to explore how that prudential regulation affects the conditional distribution of WAEMU bank stability. Findings The analysis reveals heterogeneity resulting in two distinct groups. Using the quantile regression approach, this study demonstrates that prudential regulation has a significantly more substantial and positive effect on the upper quantiles than on the lower quantiles of the conditional distribution of WAEMU bank stability. Furthermore, the effect of banking regulation also varies among pan-African cross-border banks, national banks and foreign banks. Among these types of banks, pan-African cross-border banks remain the most stable by adopting prudential regulation. The results remain robust and vary across different WAEMU countries. Originality/value The contribution of this study to the literature is multifaceted. First, this study uses individual bank-level constituted in panel data from the WAEMU region to assess the effect of prudential regulation on the stability of the WAEMU’s banking sector. This approach allows for a more granular analysis as this study considers individual regional banks’ specific characteristics and behaviors. Second, this study considers the heterogeneous effect of regulation on the stability of banks within the WAEMU space. This means that this study acknowledges that not all banks are affected similarly by prudential regulations, and this research aims to identify and quantify these differences.

Contribution of Islamic Finance to Inclusive Growth: A Comparative Study of the West African Economic and Monetary Union (WAEMU) and North African Countries

ABSTRACT Purpose — In recent years, economic growth in the West African Economic and Monetary Union (WAEMU) has been positive, but the precariousness of the population has remained virtually unchanged. Thus, the search for inclusive growth should be considered, and that is the subject of this comparative study to determine the contribution of Islamic finance to inclusive growth. Design/Methodology/Approach — First, this paper sets up an inclusive growth index to undertake a comparative study between WAEMU countries and North African countries before and after the integration of Islamic finance in order to examine the impact of Islamic finance in these countries. The paper then compares these two areas, WAEMU countries and North African countries, variable-by-variable, using a Student’s t-test over the period 2010–2023. The group of North African countries included in this study is found to have a high Islamic finance development indicator compared to the WAEMU zone. Findings — The results show that growth is more inclusive in North African countries. However, the lack of data on Islamic financial institutions operating in the countries examined makes it impossible to determine the extent of their contribution to the economies of these countries. Originality/Value — The studies that have dealt with this topic have been limited to the relationship between finance and the components of inclusive growth. Others have chosen the quality of economic growth as the variable for inclusive growth. However, this study goes beyond that by showing the influence of Islamic finance on an index of inclusive growth that takes into account eight components. This adds value to the existing literature.

Economic Cycles and Employment Growth in the WAEMU Zone: An Analysis Using a Non-Linear ARDL Panel Model

The West African Economic and Monetary Union (WAEMU) is facing frequent and diverse crises that are affecting economic stability and employment opportunities in the region. It is important to analyze the impact of economic cycles on employment, as the response of employment supply differs during economic growth and contraction. This article uses a lagged non-linear auto-regressive model (NARDL) on panel data from 1990 to 2022, along with various filters, to examine the relationship between employment and business cycles. The study found that there is an asymmetric relationship between economic growth and employment, with the impact of economic recessions being stronger on long-term employment than on short-term employment. The study suggests that countries have not fully utilized their economic potential to benefit employment. To achieve sustainable economic growth and reduce the proliferation of the informal sector, economies should focus their efforts on translating their potential into action.

From expanding financial services to tackling poverty in West African Economic and Monetary Union: The accelerating role of mobile money

AbstractThis paper aims to assess the accelerating role of digital technology in fighting poverty through financial inclusion in the countries of West African Economic and Monetary Union (WAEMU). Based on a sample of the adult population from the World Bank's Findex database, we estimate a recursive bivariate probit model that addresses endogeneity. The findings show that the regular usage of mobile money as well as the purpose of mobile money usage including saving, borrowing, remittance and their combinations increase diversely and significantly the probability of short‐term poverty alleviation in WAEMU. In addition, the change in poverty status can be indirectly due to certain driving factors of mobile money usage including mainly the ownership of mobile phones.

Analysis of Factors Impacting the Negativity of the net Result of Primary Banks of the West African Economic and Monetary Union (Waemu)

This study aims to analyse the explanatory factors of the negativity of the net result of primary banks in the West African Economic and Monetary Union (WAEMU). We collected data from the World Bank (WB) and the Central Bank of West African States (BCEAO). The data collected are annual data from 2003 to 2019 and concern all eight WAEMU countries. The analysis tools used were EXCEL and STATA 15 software. The estimation results showed that the increase in the cost of risk (CR) and the increase in general operating expenses (GOE) have a negative sign on the negative net result. Therefore, these two variables (CR and FGE) significantly positively affect the opposing net result. However, the increase in interest and similar income (IPA) has a positive sign, which leads us to say that this factor has a significant adverse effect on the opposing net result. To improve the negative net result, operational recommendations were made to primary banks in the WAEMU based on the results of our analysis.

Knowledge as Determinant of Total Factor Productivity in West African Economic and Monetary Union (WAEMU)

Knowledge as Determinant of Total Factor Productivity in West African Economic and Monetary Union (WAEMU)

THE IMPACT OF CLIMATE CHANGE ON CUSTOMS REVENUES IN THE WAEMU ZONE

In recent years, the planet has been marked by major events: immigration, terrorism, armed conflicts and above all global warming which is attracting the attention of countries around the world and those of WAEMU in particular. Global warming leads to disruptions in the functioning of production cycles. Indeed, these countries which are essentially agricultural are facing several phenomena. The impact of climate change on customs revenues in the West African Economic and Monetary Union (WAEMU) area refers to the effects that climate variations, such as increased temperatures, extreme weather events, rising of sea level and changes in precipitation, can have on the revenue generated by customs activities in this region. 
 Agricultural production is falling sharply. This inevitably leads to a reduction in customs revenue. Customs revenues constitute the main means of development for these countries. This question is of capital importance insofar as it obliges States to adopt new policies. They should diversify areas of production and think about transforming products in order to increase added value. Furthermore, WAEMU States would benefit from taking an increasing interest in industrialization policies in order to minimize imports which weigh heavily on the trade balance because the effects of global warming will continue to grow.

Health expenditure: how much is spent on health and care worker remuneration? An analysis of 33 low- and middle-income African countries

ObjectivesTo assess the amount spent on health and care workforce (HCW) remuneration in the African countries, its importance as a proportion of country expenditure on health, and government involvement as a funding source.MethodsCalculations are based on country-produced disaggregated health accounts data from 33 low- and middle-income African countries, disaggregated wherever possible by income and subregional economic group.ResultsPer capita expenditure HCW remuneration averaged US$ 38, or 29% of country health expenditure, mainly coming from domestic public sources (three-fifths). Comparable were the contributions from domestic private sources and external aid, measured at around one-fifth each—23% and 17%, respectively. Spending on HCW remuneration was uneven across the 33 countries, spanning from US$ 3 per capita in Burundi to US$ 295 in South Africa. West African countries, particularly members of the West African Economic and Monetary Union (WAEMU), were lower spenders than countries in the Southern African Development Community (SADC), both in terms of the share of country health expenditure and in terms of government efforts/participation. By income group, HCW remuneration accounted for a quarter of country health expenditure in low-income countries, compared to a third in middle-income countries. Furthermore, an average 55% of government health expenditure is spent on HCW remuneration, across all countries. It was not possible to assess the impact of fragile and vulnerable countries, nor could we draw statistics by type of health occupation.ConclusionsThe results clearly show that the remuneration of the health and care workforce is an important part of government health spending, with half (55%) of government health spending on average devoted to it. Comparing HCW expenditure components allows for identifying stable sources, volatile sources, and their effects on HCW investments over time. Such stocktaking is important, so that countries, WHO, and other relevant agencies can inform necessary policy changes.

Threshold Impact of Remittances on Real Exchange Rates for WAEMU: A Panel Smooth Transition Regression Approach

This paper explores the nonlinear relationship between workers’ remittances and real effective exchange rates for West African Economic and Monetary Union (WAEMU) member countries using the panel smooth transition regression (PSTR). The PSTR was estimated with one transition function and one location parameter as dictated by the diagnostic tests. The diagnostic tests reveal that the relationship between workers’ remittances and real effective rates is nonlinear. The estimated threshold value is 3.07%. The results reveal that increases in workers’ remittances have a depreciating effect on real effective exchange rates in regime one, associated with threshold value of less than 3.07%. However, in the second regime when the threshold value is greater than or equal to 3.07%, increases in workers remittances have an appreciating impact on real effective exchange rates. These results substantiate that the relationship between workers’ remittances and real effective exchange rates is asymmetric and as such should be modeled accordingly. Above all, the results confirm the presence of Dutch disease effect in the second regime where the estimated coefficient on workers’ remittances is negative and statistically significant. However, there is no evidence of Dutch disease effect in the first regime where the regression coefficient on workers remittances is positive and also statistically significant. Policy implications are discussed.

Institutional quality and green economic growth in West African economic and monetary union

PurposeThis study examined the how institutions influence green economic growth in the West African Economic and Monetary Union (WAEMU) countries with view to contributing to Sustainable development goal of good health and well-being (SDG 3), clean water and sanitation (SDG 6), decent work and economic growth (SDG 8), sustainable cities and communities (SDG11), responsible consumption and production (SDG12). MethodologyThe study made use of data sourced from the Development Indicators (WDI) and Governance Indicators (WGI) from 2002 to 2017 covering the eight (08) WAEMU countries. The study applied the Fully Modified Ordinary Least Squares (FMOLS), which is robust to the heterogeneity and endogeneity presence, to estimate the long-run parameters of the institutional quality effect on green economic growth. FindingsFindings obtained from the study show that the institution's quality influence differs across the countries of study. The findings implication is that institutional quality enhances green economic growth. In specific terms, institutions level enhances green economic growth in counties such as Cote d’Ivoire, Mali, Niger, Senegal, and Togo. On the contrary, it however, deteriorates green economic growth in other countries such as Benin and Burkina Faso. ConclusionAgainst this finding, the study recommends that there is the need for WAEMU countries to consider the improvement of institutional framework, making sure that a robust institutional mechanism such as elimination of corruption, improve government effectiveness, strong credibility of government commitments and policies, an efficient judiciary, sound policies and regulations to reach the green economic growth desired level. ImplicationThe findings implication is that good institutional framework such as good governance, control of corruption, political stability and absence of violence among others, are essential factors in promoting green economic growth. The findings highlight the importance of investment in renewable energy and sustainable agriculture as key drivers of green economic growth in the region. These findings have important implications for policymakers in the WAEMU region, as they provide evidence-based insights into the role of institutional quality in promoting sustainable and inclusive economic growth. OriginalityThe study extends the frontiers of knowledge on green economic growth by using green economic growth a new established indicator that makes use of economic and environmental indices to ensure accurate and assessable economic prosperity.

Financial dualism: An analysis of the effects of informal finance on formal finance in West African Economic and Monetary Union (WAEMU) countries

AbstractThis paper analyzes the effects of informal finance on formal finance in West African Economic and Monetary Union (WAEMU) countries. To this end, it uses a Probit model with a binary endogenous regressor and data from the Global Findex database, 2021. The findings indicate that having already saved informally positively affects the behavior of individuals to save formally. They also indicate that informal financial credit positively affects formal financial credits in the WAEMU. These findings indicate that formal finance is complementary to informal finance in the WAEMU. On the other hand, the findings show that labour force participation, mobile banking use and online banking use increase the likelihood of use of formal and informal services in the WAEMU. This paper suggests that formal financial institutions (mainly banks and microfinance institutions) should strengthen their collaboration with actors (money keepers, itinerant bankers, tontines systems) involved in the provision of informal financial services to populations in order to improve formal financial intermediation in the WAEMU.

Can national productions replace imports in West African countries? Estimation of the Marshall–Lerner–Robinson condition (MLRC)

PurposeThis article examines if the national productions of West African Economic and Monetary Union (WAEMU) countries can be substituted for the imports by testing MLRC in these countries.Design/methodology/approachThe Mundell–Fleming model (MMF) is the analytical framework adopted in this paper with import demand and export supply functions estimation borrowed to Thirlwall (1979). This study covers four countries in West Africa from 1990 to 2021. The estimation procedure used is an Autoregressive Distributed Lag (ARDL) approach to cointegration.FindingsThe findings reveal that there is a strong marginal propensity to import in the WAEMU countries. The hypothesis of a non-significant price effect on imports in the short-term is confirmed for several countries while only Togo satisfies the MLRC in the short and long run.Originality/valueThis study presents several originalities: (1) it evaluates MLRC with a clear analytical framework; (2) unlike other studies, this article quantifies the MLRC from a theoretical, econometric and empirical point of view; (3) this article presents the results country by country in order to reveal heterogeneity between countries; (4) this study adds to the Marshall–Lerner condition for the derivation of Robinson by considering a situation where initially the trade balance is not in equilibrium.

Qualitative Analysis of West African Economic and Monetary Union Decades’ Economic Growth

<p style="text-align: justify;">The study analyses the long growth rate period contribution to human development in West African Economic and Monetary Union (WAEMU) from 1996 to 2019 introducing time and institutional indicators effects analyses. Time and institutional effects both greatly improve model's diagnostics statistics. Time effects reduce growth variable coefficient and its significance, but not institutional effects. Combined effects inhibit growth contribution to human development. It appears essential to increase the resiliency of growth and the efficiency of government institutions.</p>

Analysing Trade Creation and Trade Diversion effects in ECOWAS Regional Trade Agreement

Aim/Purpose – The study focuses on trade creation and trade diversion effect in the Economic Community of West African States (ECOWAS) regional trade agreement. It examines if the ECOWAS regional trade agreement has brought about trade creation and/or trade diversion before the period of ban on certain items of importation by the Nigerian government as against the terms of the agreement. 
 Methodology – The study uses augmented gravity model. Estimations were carried out on bilateral trade flows, trade creation and trade diversion within the region. Secondary data (2008-2018) were obtained from reliable sources. Ordinary least squares (OLS) and panel data regression was used to analyze the data. 
 Findings – It was found that the GDP (wealth), population and political stability of the exporting countries will significantly foster intra-regional bilateral trade flow while variables like land area, landlocked and distance will significantly reduce bilateral trade flow in the region. The population, landlocked, political stability and corruption perception variables of the importing countries are found not to be statistically significant. R2 being the coefficient of determination falls between 54.8% and 63.3% which implies that the independent variables have been able to explain 54.8% to 63.3% of the total variations in the dependent variable.
 Research implications – Membership of some of the ECOWAS members in Global System of Trade Preferences among developing countries (GSTP) was found to have resulted in trade diversion; whereas, participation of some of ECOWAS members in West African Economic and Monetary Union (WAEMU) has contributed to the level of trade creation in ECOWAS region.
 Originality/value/contribution – The level of trade creation in the ECOWAS region can be improved upon provided all member states adhere strictly to the terms of the agreement.

Effects of financial inclusion on tax revenue mobilization: Evidence from WAEMU countries

AbstractFinancial inclusion remains at the heart of governments concerns. By creating favorable conditions for access to a diversified range of adapted financial products and services at affordable costs for the populations, financial inclusion generates important opportunities that could lead to increased tax revenue mobilization. This paper analyzes the effects of financial inclusion on tax revenue mobilization, using panel data from West African Economic and Monetary Union (WAEMU) countries over the period 2006–2019. The findings suggest that financial inclusion positively and significantly influences government's tax revenue. Moreover, by looking at the effects of disaggregated financial inclusion dimensions (access, use, and affordability) on various components of tax revenue, we find that the estimated coefficients on the subcomponents of financial inclusion are statistically significant. Results also indicate that the magnitude of effect of financial inclusion is higher on indirect taxes compared to direct tax revenues. This research recommends that policy‐makers should prioritize financial inclusion in their policies and development agenda through National Financial Inclusion Strategies (NFIS) because it can increase countries' resource mobilization and help them to build fiscal resilience.

Youth and civic participation in Côte d’Ivoire

This article analyses civic participation in general and particularly that of young people in Côte d’Ivoire using data from the Governance, Peace and Security survey, conducted within the framework of the Integrated Regional Survey on Employment and the Informal Sector of the West African Economic and Monetary Union (WAEMU) in 2017 The findings confirm the low level of involvement of the population in general, and of young people in particular, in civic activities, both political and social. This can pose serious threats to the peace, democratisation and development process, as the involvement of citizens in political and social activities is the hallmark of a democratic society and ensures social cohesion and development. Institutional variables (presence of corruption, growing insecurity and mistrust) reduce civic participation, including in political and social life. Young people’s involvement in public activities increases in a controlled, less corrupt environment of public safety in which they have greater trust in the state. The living environment (urban and other rural), professional situation (unemployed, inactive) and standard of living of young people (middle class and wealthy) increase their involvement in public activities. Political and social participation influence one another and civic participation is more marked by political participation.

Socioeconomic and geospatial determinants of households’ food and non-food consumption dynamics within the West African Economic and Monetary Union

This article explores the cross-sectional properties of household's food and non-food consumption expenditures conceptualized as inter-dependent spatial random processes within the West African Economic and Monetary Union (WAEMU). To this end, the paper applies spatio-temporal econometric methods to data extracted from the first edition of the Harmonized Survey on Household Living Conditions (EHCVM, 2018/2019). The findings from the unconditional distribution of household economic wellbeing (measured by nominal per-capita food and non-food expenditures) using the inequality indicators of the Atkinson and Gini coefficients, suggest the presence of cross-sectional inequalities in household food and non-food wellness within WAEMU. However, food wellness inequality appeared lower than that of non-food wellness across the 8 countries. In addition, the economic security analysis, based on the indices of Watts, Sen, and Foster (aplha=1), highlight important spatial heterogeneity in household's vulnerability to poverty within-and-between WAEMU country members. Moreover, estimation of the semiparametric bivariate Gaussian copula model of food and non-food consumption expenditures, shows their significant dependence with household's demographic and geospatial characteristics, as well as the economic and health characteristics of the household head. Indeed, among other key findings, a gender based gradient in household's food and non-food wellness at respectively 3.6 and 4.4% is observed in favor of male headed households; along with an Urban/Rural divide in food and non-food wellness at 20.7% and 27.3%, respectively, in favor of urban households. Therefore, in line with goals 1, 2, 4, 5, 9 and 10 of the United Nations 2030 Agenda for sustainable development, the paper provides key insights for evidence based policy making within WAEMU.

Can corporate financing through the stock market create systemic risk? Evidence from the BRVM securities market

This paper investigates the systemic risk in the West African Economic and Monetary Union (WAEMU) stock exchange (Bourse Régionale des Valeurs Mobilières - BRVM). It examines the extent to which growing activities in this stock market generate systemic risk. We find strong linkages across all economic sectors of listed firms, with the financial and industrial sectors being the center of the system around which the other sectors revolve. Financial institutions are not the only source of systemic risk in the WAEMU region, even though they play an important role in the system. Finally, using panel regressions, we find that big, high-growth and profitable firms contribute more to systemic risk than others. Overall, we find that the determinants of systemic risk depend on the indicator used to assess it and the sectors in which companies operate.

Revamping the West African Economic and Monetary Union (WAEMU) Fiscal Framework

Revamping the West African Economic and Monetary Union (WAEMU) Fiscal Framework

Foreign Direct Investment and Economic Growth in Africa: Another Look from the WAEMU Region

Using panel cointegration and Granger causality techniques for the period 1994 to 2018, this article empirically explores the relationship between foreign direct investment (FDI) and economic growth in the West African Economic and Monetary Union (WAEMU). Contrary to the literature’s widely accepted opinion, we find no evidence of a causal relationship between FDI inflows and economic growth in the WAEMU region. This surprising result can be explained by the weakness of absorptive capacity factors as pointed out by the literature. However, we find contrary to the literature that the importance of absorptive capacity is a necessary but not sufficient condition to ensure the growth impact of FDI in these countries. The Null effect of FDI inflows on growth is also explained by the structural FDI sector-oriented puzzle observed in these countries. Sectors attracting the most FDI inflows are the ones that contribute the least to economic growth. Conversely, sectors contributing the most to economic growth are those which attract the least foreign capital. This finding provides crucial policy implications for the WAEMU region in terms of rethinking their FDI attractiveness policies in favor of more efficient, and inclusive economic growth.