Impact of productivity shock on household welfare in AfCFTA: a GSSA method

Franck Xavier Signe ()
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Franck Xavier Signe: University of Rennes

SN Business & Economics, 2025, vol. 5, issue 5, 1-18

Abstract: Abstract In a bid to improve living standards, the African Union and African Development Bank is encouraging the free movement of goods and productivity via technological innovation. In 2018, it even signed a continental free trade agreement (AfCFTA) between the various member countries, given that these countries do not have the same currency. This study quantitatively analyses the impact of a productivity shock on household welfare in Africa free trade zone (AfCFTA). Using the Generalized Simulation Stochastic Algorithm (GSSA) method and productivity data from the AfCFTA countries, we analyse welfare when there is economic integration and when there is not. The results show that when a country’s productivity level is high, so is the welfare of its population, with or without economic integration. Monetary integration must precede economic integration if the welfare of all households in member countries is to improve. Monetary integration guarantees a fixed parity of exchange rates between member countries and consequently stable or low fluctuating prices. This stability enables individuals to make better forecasts and improve trade.

Keywords: Programming models; Economic integration; Welfare; Technological change; Neoclassical economic growth (search for similar items in EconPapers)
JEL-codes: C60 F15 I31 O33 O40 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s43546-025-00817-8

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