The West African Economic and Monetary Union and the African Growth and Opportunity Act: A Computable General Equilibrium Approach

The countries of the West African Economic and Monetary Union (WAEMU) like the other Sub-Saharan African countries face the challenge of generating sustained economic growth. Among factors that contribute to this problem are the low degree of openness to trade and the lack of foreign capital. To encourage trade and investment in Sub-Saharan Africa, the United States passed the African Growth and Opportunity Act (AGOA). This paper develops and uses a Computable General Equilibrium model to determine the impacts of this act on WAEMU as a group. The results from the simulation of free-trade and an increase in foreign capital inflow show that the sectoral effects of these policies are considerable. At the macro level we see increases in the growth rate of real GDP, real investment, government revenues, total saving, and total consumption.