Assessing the Role of Governance in West African Fiscal Performance

Abstract

The article analyzes the short-run and long-run dynamic relationship between the quality of institutions and fiscal performance in 12 West African countries over the period of 1984 to 2016 using Pooled Mean Group and Mean Group estimator. The results show that, in the long run as well as in the short run, improved governance appears to lead to decreasing deficits. In comparison with other measures, in the long run, democratic accountability dimension seems to have the most significant effect on West African fiscal performance. However, the empirical evidence further reveals that, in the short run, the institutional dimensions are found to be insignificant in explaining West African fiscal performance. Hence, given that increased public debt could harm the quality of sustainable fiscal measures, the study suggests that creating incentives for the building of sound institutions and securing enabling governance would enhance fiscal prudence and sustainability in West Africa. JEL Classifications: G, H