Trade openness and economic growth in Africa's regional economic communities: empirical evidence from ECOWAS and SADC

Betsy M Oloyede,Evans S Osabuohien,Jeremiah O Ejemeyovwi

doi:10.1016/j.heliyon.2021.e06996

Betsy M Oloyede, Evans S Osabuohien + Show 1 more

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https://doi.org/10.1016/j.heliyon.2021.e06996

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Journal: Heliyon	Publication Date: May 1, 2021
Citations: 26	License type: cc-by

Affiliation: Covenant University

Abstract

In light of increasing globalisation, countries do not just open their economies to trade; some factors have to be influenced. This study analyses the relationship among trade openness and macroeconomic outlook of Africa's regional economic communities (RECs), focusing on the Economic Community of West African States (ECOWAS) and Southern African Development Community (SADC). The study applies the Pooled OLS, Fixed and Random Effects techniques of estimation and the Durbin-Wu Hausman test for endogeneity to categorised secondary data from the World Bank's World Development Indicators (WDI) and the United Nations Conference on Trade and Development (UNCTAD) databases. The datasets are classified into three segments for comparative analysis, comprising the total, ECOWAS, and SADC datasets. The results show a positive but insignificant nexus between economic growth rate and trade openness in both the combined simulated ECOWAS and SADC and the individual REC. The results emphasise that the government and other relevant stakeholders should ensure policies are enacted and enforced to transmit the experienced economic growth into substantial trade gains and further trade openness in ECOWAS and SADC.

Highlights

The study examines the impact economic growth has on trade openness in Africa's regional economic communities (RECs) drawing empirical evidence from Economic Community of West African States (ECOWAS) and Southern African Development Community (SADC)
The study finds that economic growth does not significantly affect trade openness in the combined RECs as well as ECOWAS and SADC
The list of countries with respect to their respective membership of ECOWAS and SADC are in Table A1 inAppendix

Summary

Introduction

The study examines the impact economic growth has on trade openness in Africa's regional economic communities (RECs) drawing empirical evidence from Economic Community of West African States (ECOWAS) and Southern African Development Community (SADC). The ECOWAS and SADC are chosen as the study's focus because, among the existing RECs in Africa, ECOWAS and SADC are two of the most successful regional integration agreements with large imports and exports of both financial and non-financial goods and services (Ejemeyovwi et al, 2018; World Bank, 2019) These selected RECs provide good samples to investigate the impact of economic growth on trade openness, replicable to the other Africa's RECs. Owing to the increasing realisation of facts by leaders in Africa, the continent's sectoral fragmentation's value is rising, and the disassociation from global markets is in many ways turning into something reasonable. These regional agreements possess the ambition of facilitating trade among countries by reducing costs of transaction like tariff and non-tariff barriers and breaking the limitation of cooperation among countries towards achieving the aim of an African Common Market (Foroutan, 1992; Olayiwola et al, 2015; Osabuohien et al, 2019)

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