Has Agricultural Specialization Synchronized Business Cycles in The Waemu?

This paper analyses the cyclical impact of agricultural productivity shock on macroeconomic fluctuations in West African Economic and Monetary Union (WAEMU) in order to determine its nature covering the period of 1960 to 2021. Since the advantage of an economic union is the reduction of the effects of asymmetric shocks and the better management of symmetric shocks, given the agricultural specialization of member countries, shocks to agriculture should promote the synchronization of business cycles. Our search for sources of synchronization leads us to use a Markov switching model with value added in the agricultural sector as the probability transition variable. Our main results indicate that, in the short term, in Senegal, the agricultural sector is likely to lead the economy into the expansion phase, unlike in Côte d'Ivoire and Mali. As a result of the activities of the agricultural sector, the probability transition parameters show that shocks have permanent effects on economic activity in the expansion phase in Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Niger and Togo. These economies do not exhibit some short-term vulnerability to fluctuations in agricultural commodity prices. The cycles are relatively long for Guinea-Bissau, Mali, and Togo. On the other hand, cycles are shorter in Burkina Faso and Senegal. This may justify the failure of certain economic stimulus policies of the 1980s and 1990s and the withdrawal of state subsidies in the agricultural sector in most of these countries. In addition, the significant differences in the length of the economic cycle in the WAEMU due to the activities of the primary sector show that business cycles have not yet been synchronized. This may confirm the thesis of Prebisch-Singer (1950): the trend towards deterioration in the terms of trade.