Effects of International Trade on Economic Growth of Economic Community of West African States (Ecowas) (original) (raw)
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Impact of International Trade on Sub Saharan Africa's Economic Growth
2009
We would like to express our deep and sincere gratitude to our supervisor Yinghong Chen (PhD) for her valuable support, encouragement, excellent supervision and precious suggestions through out this research work. Her understanding, encouraging and personal guidance has enabled us to complete this research paper successfully.
Journal of Economic and Financial Sciences
It is well known that developing countries have enormous constraints in what they can bring to global trade and investment. Economic Community of Western African States (ECOWAS) countries export primary commodities that make them vulnerable to external shocks. Inadequate infrastructure and the small size of their domestic markets often limit their access to foreign markets (Clark, Dollar & Micco 2004; Gulati et al. 2007). Rising trade costs and limited access to technology and intermediate inputs for firms in developing countries constitute a barrier to entry into world markets, as well as participation in global value chains (Arvis et al. 2013). Orientation: The establishment of the African Continental Free Trade Area has raised a new question regarding the link between gross domestic product (GDP) per capita and trade openness among economists and policymakers. Research purpose: The purpose of this research is to provide an understanding of the potential free trade agreement between Economic Community of Western African States (ECOWAS) countries. Motivation for the study: Trade liberalisation is seen as an avenue for African countries to achieve social and economic advancement. Therefore, establishing the contribution of trade to economic growth is of paramount importance to society, especially for developing economies. Research approach, design and method: This study used two econometric tools-the autoregressive distributed lag (ARDL) bound testing approach and the pool mean group (PMG) model-to assess the link between trade openness and GDP per capita in ECOWAS. The data set covers the 15 ECOWAS member countries over the period 1990-2016. Main findings: The study indicates the existence of a long-run relationship between the variables at 1% in all countries except for Ghana, Guinea-Bissau, Mali, Senegal and Togo. This implies that the variables are cointegrated; hence, the PMG can be used. The estimation reveals that trade openness has a negative impact on GDP per capita in the long run. The findings have important implications for policymakers in the ECOWAS region and other developing countries. Practical/managerial implications: The paper invites policymakers in the region to carefully consider the outcome of the agreement in each member country and adjust accordingly with tariff barriers. Contribution/value-add: Even though trade liberalisation can be beneficial, the lifting of trade barriers in all sectors among ECOWAS members will not contribute to growth. ECOWAS countries must decide the sectors they want to liberalise and also add value to their production of goods and services in order to fight poverty and boost income.
HUMANUS DISCOURSE, 2023
The objective of the study is to examine the differential impact of trade on economic growth among ECOWAS and Non-ECOWAS countries from 2000 – 2015. To achieve this objective, the study used secondary data sourced from the World Bank Data Base on Macroeconomic Indicators and Selected Statistics on African Countries an Annual Publication of African Development Bank. GDP was used as a proxy for economic growth while import, export, and foreign exchange rate as proxies for international trade. The data obtained were subjected to the following diagnostic tests; Unit root test, Co-integration test and Granger causality test as well as Error Correction Mechanism before the model was estimated. The estimated model was also subjected to statistical and econometric tests like t-test, goodness of fit, and f-test to determine its policy implications. E-views 10.0 and STATA Econometric Software Version 14.2 were used to estimate the model. Ordinary Least Square Multiple Regression Analysis was conducted with the aim of establishing if there is differential impact of international trade among ECOWAS and Non-ECOWAS countries using the variables in the study or otherwise. The study selected six ECOWAS and six Non-ECOWAS countries based on the availability of data. The study reveals that international trade drives economic growth in both ECOWAS and Non-ECOWAS countries. Comparatively, international trade promotes economic growth more in the Non-ECOWAS countries than the ECOWAS countries. The study recommends that ECOWAS countries need to borrow a leaf from their Non-ECOWAS countries in terms of trade enhancing policies. This is because the Non-ECOWAS countries benefit more from trade than the ECOWAS countries. Key words: Differential impact of trade, Economic growth, International trade.
Trade and Economic Growth: Theories and Evidence from the Southern African Development Community
SSRN Electronic Journal, 2020
This paper empirically tests the hypothesis that trade can act as an engine of growth using panel data for the Southern African Development Community (SADC), a regional integration agreement (RIA) organization, the central objective of whose formation was the need to accelerate, foster, and encourage the region's growth. Our results indicate that during the period covered by this study (2005-2017), export expansion stimulated growth, more openness to trade reduced it, and that the formation of SADC had not yet brought about any effects on growth perhaps because of lack of full establishment of the primary instruments for achieving its central objective. These results lead to three conclusions. Firstly, trade through export expansion seems to be a better solution for SADC for achieving the central objective of its formation. Secondly, more openness to trade seems to jeopardize growth. Finally, the formation of SADC has not yet brought about the expected gains from a RIA. In this context, we recommend that policymakers should consider adopting measures aimed at supporting increased trade through promoting export expansion, achieving strong absorption of negative chocks that usually result from trade, and exploring the possibility of establishing all the planned primary instruments for achieving SADC's central objective.
Trade as an Answer to Sustainable Economic Growth—The ECOWAS Story
Global Business Review, 2012
We consider the case of Economic Community of West African States (ECOWAS) which is one of the largest free trade areas in Africa. We examine whether the ECOWAS member countries have favourable economic characteristics to undertake a deeper economic integration, moving towards an economic union status. Under favourable condition, policymakers in the ECOWAS region can be persuaded to implement deeper economic integration. An increase in trade, resulting from deeper economic integration in the ECOWAS region, can compensate for fall in trade between ECOWAS, and rest of the world. Because of the global economic crisis, trade flow in the ECOWAS region has fallen besides adversely affecting regional macroeconomic variables: trade balance, current account balance, fiscal balance, investment and domestic credit. The poor state of macroeconomic variables has a direct impact in reducing mean income of the region, and indirectly might affect income distribution. Increase in trade in the ECOWAS is expected to generate resources to increase aggregate demand, and to meet regional development expenditures.
A Causal Relationship Between Trade And GDP Growth In Togo
As a source of foreign exchange reserves, trade of goods and services is played an important role in accelerating economic growth of worldwide; and south -south countries are not exempted from this general trend. While a number of few studies surveys attest that trade between developing countries (South-South trade) can reduce balance of payments problems, and creates employment opportunities; a scarcity of research still exists in this area, particularly investigating questions with respect to the positive effects of trade on economic growth in Sub Sahara countries especially in Togo.
Scholedge International Journal of Management & Development, 2019
The paper investigated the trade-led growth hypothesis or growth-led trade hypothesis in WAMZ countries (Nigeria, Gambia, Ghana, Guinea, Liberia and Sierra Leone). Individual country and cross-sectional analysis were done and for the individual country analysis, FMOLS, DOLS, and CCR were considered with Granger causality. The estimated results confirmed the import-led growth hypothesis for Nigeria, Guinea, and Liberia, a trade-led growth hypothesis for the Gambia and Sierra Loan and export-led growth was supported for Ghana. For cross country analysis, FMOLS, DOLS and Granger causality tests were used and trade-led growth hypothesis (both export-led and import-led growth) was valid in WAMZ countries but imports were the most significant variable that influences economic growth than exports. The paper recommended that export promotion policy in WAMZ should focus on manufacturing exports and import substitution policy in WAMZ should focus on importing raw-material and technology for m...
African Trading Blocs and Economic Growth: A Critical Review of the Literature
2016
There is general consensus among scholars, policy makers, and political leaders that the best way for African countries to develop is through regional trade. Regional integration and trading blocs have been suggested as ways that African nations can use to achieve sustained development and increase their participation in the global economy. Therefore, there is a need to evaluate the interrelationship between African trading blocs and economic growth of the African continent. This paper analyzes this link using theoretical and empirical literature reviews. The key findings are that intra-Africa trade is still low, despite the existence of numerous trading blocs, and that few of these contribute to regional trade creation. Poverty rates are still high and GDP does not seem to be positively influenced by the trading blocs. Many social, economic, and political challenges also weaken African trading blocs and their ability to promote integration and trade. Addressing these hindrances wou...
Economy
The contention that deteriorating terms of trade exists in countries that rely heavily on the exploitation and export of natural resources motivated us in this study. We therefore sought to investigate the impact of terms of trade on economic growth in natural resource-rich sub-Saharan African countries. We carried out the study using annual series that span a period of 1990-2019 under the framework of panel Random and Fixed effects. Our findings indicate that a long run relationship exists between GDP and the explanatory variables used in the study. Results also show that, while cross-section random effects indicates that terms of trade positively impacts on GDP, period fixed effects shows that terms of trade negatively impacts on GDP even though it is not significant. Results of our study also show that in all the models, labour force total and FDI have positive impact on GDP, while trade openness impacts on GDP negatively. We therefore recommend that the SSA natural resource-rich...