Optimal Seigniorage and Tax-Smoothing in West African Monetary Zone (WAMZ): An Econometric Assessment

The fiscal performance of many sub-Saharan African countries has been quite dismal over the past, with a number of them accumulating huge deficits. This paper examines fiscal sustainability in the West African Monetary Zone (WAMZ). It departs from the standard model of fiscal sustainability and adopts the optimal seigniorage and tax smoothing model. Using vector autoregressive model and data from two selected countries, Ghana and Nigeria, the study finds no concrete evidence in support of the optimal seigniorage and tax smoothing in WAMZ. The findings call for important fiscal reforms to reverse the persistent fiscal deficits. Such reforms should include measures to ensure compliance and eliminate fiscal corruptions