BALANCE OF PAYMENTS ADJUSTMENT : THE WEST AFRICAN MONETARY ZONE EXPERIENCE

This paper examines the monetary approach to the balance of payments for the WAMZ countries during the period 1975–2008. It examines whether excess money supply played a role as a disturbance using panel data estimation technique involving both the within-country and cross-country effects. The empirical results suggest that money played a significant role in determining the balance of payments, a result that validate the monetary approach to the balance of payment for the WAMZ countries. The strong negative relationship and link between domestic credit and net foreign asset is established. Interest rate and GDP growth were also found to have significant impact on the balance of payment in the WAMZ. The policy conclusion is that, the balance of payments disequilibrium can be corrected through appropriate financial programming, monetary targeting and the implementation of prudent fiscal policy JEL Classification: C33; E51; F46