Examining the impact of intra-industry trade on business cycle alignment within the ECOWAS

Louis-Joel Basneouinde Diendere, Achille Augustin Diendere and Jude Eggoh

International Journal of Development Issues, 2024, vol. 23, issue 3, 489-511

Abstract: Purpose - This paper aims to examine the impact of intra-industry trade on business cycle synchronization within the Economic Community of West African States (ECOWAS). ECOWAS region is characterized by limited intracommunity trade and a low level of foreign direct investment. Design/methodology/approach - First, this research uses the two-digit level harmonized system classification to measure intra-industry trade, which is straightforward to interpret and compute, making it suitable for countries with low trade intensity. Second, it uses the system generalized method of moments (system-GMM) to examine the dynamic relationship between variables and address endogeneity concerns. Findings - The results obtained from the system-GMM estimation reveal a positive and significant correlation between intra-industry trade intensity and business cycle synchronization, as well as an inhibiting effect of economic freedom on the relationship between intra-industry trade and business cycle synchronization. These results highlight the need to implement policies aimed at reducing tariff barriers, improving financial integration and intensifying production. Originality/value - This research analyze the link between intra-industry trade and business cycle synchronization within the ECOWAS. It also analyze the role of economic freedom on the link between intra-industry trade and business cycle synchronization.

Keywords: Financial integration; Intra-industry trade; ECOWAS; System-GMM; Business cycle synchronization; Trade integration (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijdipp:ijdi-12-2023-0304

DOI: 10.1108/IJDI-12-2023-0304

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