Discussion Paper

No. 2012-57 | November 05, 2012
Revenue and Expenditure Nexus: A Case Study of ECOWAS


This paper aims to assess the relationship among fiscal variables (net lending, government expenditure and revenue) and economic growth in Sub-Saharan African countries. Using yearly data for the period between 1980 and 2011 in 15 ECOWAS countries, a weak long-run relationship between government expenditure and revenue emerge, but only in the case of WAMZ countries. Granger causality analysis showed mixed results for WAEMU countries, while for four out of six WAMZ countries (Gambia, Liberia, Nigeria, and Sierra Leone) the “tax-and-spend” hypothesis holds, since government revenue would drive the expenditure. Finally, in the last three decades, cyclical component of economic growth has reduced its fluctuations, both for WAEMU and WAMZ member States.

JEL Classification:

E62, F33, B22, C33


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Cite As

Cosimo Magazzino (2012). Revenue and Expenditure Nexus: A Case Study of ECOWAS. Economics Discussion Papers, No 2012-57, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2012-57

Comments and Questions

Gbadebo Odularu - Invited Reader Comment
November 09, 2012 - 11:52

See attached file

Anonymous - Comment on Magazzino's paper
November 16, 2012 - 17:59

The paper is very intriguing and relevant for the economic policies of the West-African countries.
The English style is good.
Few typos should be fixed.
The articulation of the paper as well as its readability is effective.
The literary review is wide, but it appears more consistent with a study ...[more]

... on optimal currency area rather than the revenue and expenditure nexus.
The methodological section is clear and well-specified. Yet, a revision of the literature survey, with a focus on the revenue-expenditure relationship, might help the reader.
The econometric analysis is rigorous, using recent panel type applications. Moreover, the data have been discussed in details.
Concluding remarks and policy implications should be reinforced.

Please rate the following: (1 = Excellent) (2 = Good) (3 = Fair) (4 = Poor)
Originality: 3
Contribution To The Field: 2
Technical Quality: 2
Clarity Of Presentation: 2
Depth Of Research: 2

Requires Minor Corrections

Gian Cesare Romagnoli, Roma Tre University - Invited Reader Comment
January 04, 2013 - 09:09

This study aims to analyze the economic and political conditions which could lead the 15 Ecowas member countries to establish a monetary union in Western Saharian Africa. The Ecowas sees actually two custom and monetary unions, Waemu and Wanz, confronted with different fiscal policies results. In particular, Magazzino shows that, ...[more]

... even though the effects of tax and expenditure policies are different in size, they hold the same signs and, most of all, give strong common evidence for positive counter cyclical effects of the Keynes model vis à vis those related to the Wagner's Law. Interesting are also the results obtained by Magazzino from clustering the 15 Ecowas countries into three groups according to their fiscal policy macro variables for 2011. Two out of the three clusters substantially reflect the actual monetary areas Waemu and Wanz. A new monetary union including all 15 Ecowas countries may still have a long way to go though. In fact, differently from the Eurozone countries, the international trade of the Ecowas countries is on average less than 10 per cent of their GNP and this prevents them from receiving the fully fledged benefits associated to a single currency. Magazzino wisely adds that monetary stability risks associated to different counter cyclical policy needs in the two monetary areas will not make things easier.

Anonymous - Referee Report 1
January 09, 2013 - 09:16

See attached file

Olga Marzovilla - Cosimo Magazzino, "Revenue and Expenditure Nexus. A Case Study of ECOWAS
January 28, 2013 - 20:24

The topic of the article is very interesting and his reference to the West African countries is original.
The causality analyses presented in the paper between expenditure and revenue leads to new results compared to those of other studies.
However, for a better clarity of the text, I ...[more]

... would suggest:
1) in the introduction, to explain the differences and specificities of various regional areas taken into consideration (WAEMU, WAMZ, WAEMU, CEMAC);

2) in the introduction and conclusion, to clarify why the monetary aspects, and particularly those of EMU, are relevant to the topic of the paper and countries of West Africa;

3) in “Literature Review”, to consider only the literature specific to the topic of the paper (Revenue and Expenditure Nexus: a Case Study of ECOWAS).

Cosimo Magazzino - New version of the paper
March 01, 2013 - 11:46

I attach the new version of the paper.