Fiscal Reform and Monetary Union in West Africa



The condition for xM - xE 0 is (Fi + b(y* - yi )λλbν2d + c2 П (bθG - β )]>0 which is

also fulfilled as long as (bθ G - dθB )>0. Again, because there is no seigniorage, siE -siM

0.


Proof of Result 4:

The condition for xiA -xiM >0 is that

λθBν2 ɪ (Fi + b(y* - yi ))(λdν2 + c2 T-)>nj (xA + (y* - yj fλd + θG)λννν2+ c2ω ).

The             condition             for             siA -siM >0             is             that

(Fi + b (y * - y. )λθεV n-1 (dθβ b ~)> ɪ Σ (xA + (y * У )λν,ν2 + cβ - b θG-). Notice that
i        i i         2n               n n j j j j        12         2              n

if (nbθG - dθB )>0 the inequality reverses its sign. Hence, the comparison about structural
reforms depends not only on the distortions of country i vis-à-vis the average of the other
countries but also on the size of d.

24



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