Prospect of Economic Unions on Intra-regional Trade in Africa

Grace Nkansa Asante () and Abban Stanley
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Grace Nkansa Asante: KNUST
Abban Stanley: KNUST

Chapter Chapter 16 in Monetary and Financial Systems in Africa, 2022, pp 369-393 from Springer

Abstract: Abstract Africa records low intra-regional trade, and much efforts have been made to encourage the regional blocs to trade among themselves to facilitate the continent’s growth. The main objective of this study was to estimate the effect of adopting a common currency on intra-regional trade in SACU and ECOWAS countries and to investigate whether countries were overtrading or under-trading among themselves using the Poisson Pseudo Maximum Likelihood (PPML) estimates. The study revealed that GDP, GDP per capita, and colonizer enhance trade in the two blocs. Adopting a common currency proved to unleash more trade potentials in the blocs. Distance exhibited a negative impact on trade in the two blocs, but exchange volatility showed a positive effect on trade in the SACU bloc but a negative effect in the ECOWAS bloc. The result further indicated that countries in the two blocs were under trading, but SACU had more trade potential than countries in the ECOWAS bloc. The study recommends that the ECOWAS countries achieve the nominal convergence to adopt the common currency to unleash the bloc’s trade potential. In addition, the SACU bloc was urged to pool more non-member countries to the SADC.

Keywords: Intra-regional trade; Common currency; Trade potentials; Convergence; Trade creation; Economic union (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-96225-8_16

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DOI: 10.1007/978-3-030-96225-8_16

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