This paper investigates nonlinear effects of government debt on private consumption. The estimated consumption function shows smooth regime switching depending on the debt-to-GDP ratio, and a higher level of government debt crowds out private consumption to a greater extent.

Currency misalignments have been one of the focal points of interest in the literature devoted to the CFA Franc zone. Less attention has been paid, however, to the convergence process of real exchange rates towards equilibrium. In this paper, we analyze the short-run dynamics of real exchange...