Effect of financial development on trade openness: a comparative analysis in West African countries

Doukouré Charles Fe ()
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Doukouré Charles Fe: Ecole Nationale Supérieure de Statistique et d’Economie Appliquée (ENSEA)

International Journal of Economic Policy Studies, 2025, vol. 19, issue 1, No 4, 89-117

Abstract: Abstract Financial development is vital in boosting economic transactions in a common currency area. The monetary unification project underway in West Africa requires a factual analysis to carry out valuable reforms on the financial system to improve its performance in implementing the single currency. Hence, the interest of this comparative analysis in West Africa between West African Economic and Monetary Union (WAEMU) member and non-WAEMU member countries to assess the effect of financial development on trade openness. We use a panel data model from 2002 to 2021 for all 15 countries in West Africa. We use the General Least Square method to estimate the model. Results show that trade openness is sensitive to financial development in WAEMU, not in non WAEMU countries, and financial institutions play a crucial role in expanding trade in West African countries. The financial market state in WAEMU is a catalyst for trade openness not in non WAEMU countries. Nevertheless, potential reforms should prioritise access to financial institutions and financial markets in non-WAEMU countries.

Keywords: Financial development; Financial market; Financial institutions; Trade openness; F14; F15; F41 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s42495-024-00143-1

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