A gravity analysis of bilateral trade among ECOWAS member countries.
University of Lethbridge. Faculty of Arts and Science
Lethbridge, Alta : University of Lethbridge, Dept. of Economics
The Economic Community of West African States (ECOWAS) is one of the most prominent RTAs in Sub-Saharan Africa (SSA). The main objective of ECOWAS is to boost the economic development of member countries, reduce/eliminate trade barriers, and enhance the free movement of capital and labor among ECOWAS member countries. The ECOWAS is deemed to have important regional economic impacts on member countries, and there are important prospects to increase the effectiveness of this agreement in the future. Thus, it is important to empirically examine the magnitude of bilateral trade flows among ECOWAS member countries and to determine to what extent these trade preferences have enhanced trade flows among ECOWAS member countries. The main objective of this thesis is to examine the impact of ECOWAS on bilateral trade flows among member countries using a dataset covering bilateral trade observations among the 15 ECOWAS countries, and between ECOWAS member countries and other (non-ECOWAS) trading partners from 2000 to 2018. The empirical analysis is extended to examine the magnitude of trade flows among members of the West African Economic and Monetary Union (WAEMU), and among members of the West African Monetary Zone (WAMZ). The empirical analysis uses the conventional log-linear form of the gravity equation, and it also estimates the multiplicative form of the gravity equation using the PPML The results show positive and statistically significant coefficients on the ECOWAS binary variable, implying higher magnitudes of trade flows among ECOWAS member countries. They also show a higher magnitude of trade among WAEMU countries relative to trade among other ECOWAS members, implying that WAEMU countries have benefitted from increases in economic cooperation and coordination and the introduction of the common currency, the CFA Franc, in increasing trade among each other. They also show lower magnitudes of trade among WAMZ countries relative to trade among other ECOWAS member countries, suggesting that there is a wide margin to increase trade among WAMZ countries by increasing economic cooperation and coordination, and by introducing the common currency (ECO). Finally, regional trade flows among ECOWAS member countries could increase further by eliminating/reducing remaining trade barriers, improving infrastructure and institutions, boosting political stability, and increasing economic and political cooperation and coordination among ECOWAS member countries.
ECOWAS , Bilateral trade flows , Social science , West African Economic and Monetary Union