EFFECTS OF INTERNATIONAL TRADE ON ECONOMIC GROWTH OF ECONOMIC COMMUNITY OF WEST AFRICAN STATES (ECOWAS)

Abstract

Economic literature identifies international trade as one of the channels through which sustainable economic growth can be achieved. For years, the relevance of trade in economic growth process has been one of the most commonly debated topics among economists and policy makers in Africa. This study investigates the effects of international trade on the economic growth of Economic Community of West African States (ECOWAS) from 2000 to 2018 across the 15 countries of the sub-region. Fixed effect model in a panel data environment was used for the analysis. The variables of interest are real gross domestic product, exports, imports, exchange rate, balance of payments and gross capital formation. The results show that exports, imports, exchange rate and balance of payments exert significant positive effects on economic growth of the ECOWAS, while gross capital formation exerts significant negative effect on growth of the economy of the countries. However, the independent variables jointly showed significant growth effect. Consequently, this study recommends that the ECOWAS should explore modern technology to transform their raw materials into intermediate export goods in order to increase the limited production and export base so as to become more competitive in international trade relations. Also, the imports of the sub-region should be skewed towards intermediate production inputs such as technology, machineries and chemicals which, when combined with the abundantly available human capital, would increase the production of value-added exports volumes, improve trading position and ultimately improve economic growth of the sub-region