What Matters for the Rise in Trade? Evidence from the African Continental Free Trade Area

Kiet Tuan Duong, Luu Duc Toan Huynh, Povilas Lastauskas and Nam Vu

No 2026/199, IMF Working Papers from International Monetary Fund

Abstract: Using firm-level panel data on cross-border sales for 27 African economies (2002-2022), we study how the African Continental Free Trade Area (AfCFTA) reshaped firms’ international trade. Guided by a heterogeneous-firm model with two short-run channels, export-network history and capital adjustment frictions, linked through goods-services input linkages, we document that the 2018 signing raised the ratio of international to total sales by 2.7 percentage points (pp) by 2022. The gains were uneven: firms with prior export experience outside Africa gained 2.8 pp, versus 1.2 pp for Africa-only exporters, and goods-producing firms and those facing lower adjustment frictions responded most. Network history and adjustment frictions thus shape who benefits from continental integration and how gains propagate across the goods-services linkage, so that an intra-continental agreement disproportionately rewards extra-continental traders.

Keywords: adjustment costs; Africa; export experience; goods and services sectors; ownership structure; trade agreement (search for similar items in EconPapers)
Pages: 65
Date: 2026-09-18
New Economics Papers: this item is included in nep-iaf and nep-int
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