Regional Integration and Growth in Economic Community of West African States: A Re-Appraisal

Abstract

This study examined the effects of trade and financial integration on economic growth in ECOWAS. It spanned the period, 2010-2020. The objective of the study was to examine the effects of trade and financial integration on economic growth using trade integration index and financial integration index as proxies for trade integration and financial integration respectively. To overcome the potential problems such as cross-sectional dependence among countries, serial correlation of the error term, and more importantly, the problem of identification and endogenous repressors that characterize some panel data regression methods , this study employed an instrumental variable (IV) regression based on the dynamic panel data (DPD) method, within the framework of the generalized method of moments (GMM -SYS). The study revealed that: (1) There was a steady and sustainable growth within ECOWAS despite the low growth rates in countries of the region. (2) Trade integration had a positive significant effect on economic growth in countries of ECOWAS (3) Financial integration fostered economic growth within ECOWAS. Based on these findings, it was recommended, inter alia, that: (1) Member countries should adopt a strategy of mutual cooperation to assist countries with low levels of human capital index, gross fixed capital formation, domestic value-added, exchange rate and foreign direct investment through the provision of high - level manpower and financial support (2) ECOWAS should strive toward strengthening the productive capacities of firms in individual member countries through proper check of the smuggling activities by entrepot states to curtail dumping which usually inhibits the growth of local industries.