Comparative Effects of Monetary and Budgetary Policies on the Economy of Burkina Faso

Abstract

The article analyzes on three-time horizons the comparative effects of monetary and budgetary policies on the economy of Burkina Faso. It uses two models: error correction model and vector autoregressive model. Taking into account the passage from West African Monetary Union to West African Economic and Monetary Union and econometric results indicating a break in 1994 (year of the devaluation of the currency: XOF), the period of study 1970-2010 is split in two: 1970-1993 and 1994 -2010. The results show, on the economy of Burkina Faso, monetary policy has been more effective than budgetary policy in these three periods. From 1970 to 1993, budgetary policy was ineffective on economic growth. On the period 1994-2010, the effects of monetary and budgetary policies have been weak and statistically insignificant. The devaluation of the XOF and the adoption of the Pact of Convergence of the WAEMU did not really contribute significantly to the country's economic growth.

Keywords: budgetary policy, monetary policy, error correction model, vector autoregressive model, Burkina Faso

DOI: 10.7176/DCS/10-11-05

Publication date: November 30^th 2020