Regional integration and growth: New empirical evidence from WAEMU

Abstract

This study provides a pioneer analysis of the growth effect of WAEMU integration at the econometric level, unlike the extant literature that relied on descriptive analysis of the sub-region’s trade statistics. The study used robust instrumental variables system GMM regression in the framework of a cross-country growth model and annual panel data for the period 2000 to 2015. Contrary to the widely held view that regional economic integration fosters economic growth of the participating countries, we did not find any empirical support for a positive growth impact of WAEMU integration in West Africa, which may be due to a variety of factors that mainly point to the characteristics of the WAEMU economies. However, the results indicate that foreign direct investment (FDI), institutional quality, capital, labour and the initial real per capita GDP are important drivers of growth in the sub-region. Interestingly, the results further indicate that FDI and institutional quality are the channels through which WAEMU integration may impact on growth in West Africa. The study therefore concludes that policy reforms towards improved institutions and increased FDIs will enhance economic growth in West Africa.