Measuring trade potentials between West African Monetary Zone countries using the stochastic frontier gravity model

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Kumah, Innocent S.
University of Lethbridge. Faculty of Arts and Science
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Lethbridge, Alta : University of Lethbridge, Dept. of Economics
The countries of the West African Monetary Zone (WAMZ) have set on course processes to become a currency union. Among other conditions, the optimal currency theory proposes high trade integrations between the candidate countries of a currency union because it facilitates the synchronization of the business cycles of the countries which is needed for an effective currency union. To assess the levels of trade integrations between the countries of the WAMZ, this study constructs an export frontier for each of the countries of the WAMZ using each country’s aggregated export data for at least 45 countries over the period 2000-2014. The study applies the Battese and Coelli (1992) model as well as the Kumbhakar (1990) model. The trade efficiency estimates between the countries of the WAMZ indicate various degrees of trade integrations. Overall, the results suggest a poorly integrated region from a trade standpoint.
bilateral trade flows , currency unions , frontier analysis , monetary unions , trade potentials , West Africa