Fiscal Rules and the Pro-cyclicality of Public Investment in the West African Economic and Monetary Union

Evidence from a large panel of low-income and lower middle-income countries over the period 1995-2012 suggests that, contrary to that in other countries, public investment in the West African Economic and Monetary Union has been pro-cyclical. Public investment contracts more in bad times' than it increases in good times' and appears to have become pro-cyclical since the introduction of the fiscal convergence criteria in 1994. The pro-cyclicality of public expenditure and the high asymmetry of shocks that affect West African Economic and Monetary Union countries justify exploring options for greater counter-cyclicality of rules-based fiscal frameworks and for risk sharing. Copyright (c) 2014 John Wiley & Sons, Ltd.