Does Financial Integration Contribute to Bilateral Trade in Africa: An Empirical Investigation by the Augmented Gravity Model

Jacques Simon Song () and Hervé William Mougnol A Ekoula ()
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Jacques Simon Song: University of Dschang
Hervé William Mougnol A Ekoula: University of Yaounde II

Journal of the Knowledge Economy, 2025, vol. 16, issue 3, No 38, 12078-12117

Abstract: Abstract This article assesses the effect of financial integration on bilateral trade in Africa. Two dimensions of financial integration are considered: regional financial integration (RFI) and international financial integration (IFI). From a sample of 25 African countries, we specify and estimate a gravity model using the Poisson Pseudo Maximum Likelihood (PPML), Negative Binomial (NEGBIN), and Zero Inflated Poisson (ZIP) estimators over the period 1996–2016. Two main results emerge. First, the RFI of co-trading nations (exporter i and importer j) significantly reduces bilateral exports. Second, the exporting country’s IFI significantly increases bilateral trade, while the importing country’s IFI significantly reduces bilateral exports. We suggest a consolidation of RFIs and IFIs to increase intra-African bilateral trade.

Keywords: Africa; Bilateral trade; International financial integration; Poisson Pseudo Maximum Likelihood; Regional financial integration (search for similar items in EconPapers)
JEL-codes: F41 F43 P40 P45 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s13132-024-02309-w

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