IntraRegional Trade

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Intra-Regional Trade

• Mohamed Noor

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Background Facts

• Economic Community of West African States (
  ECOWAS) is a regional organization of 15 west
  African nations formed in 1975.
  
• In 1993, the Treaty was revised to accelerate the
  process of integration
  

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Member States
Guinea-Bissau Liberia Mali Niger Nigeria Sene
gal
Sierra Leone Togo
Benin Burkina Faso Cape-Verde Côte-dIvoire Th
e Gambia
Ghana Guinea
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Maps of ECOWAS
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ECONOMIC COMMUNITY OF WEST AFRICAN STATES
Abuja, Nigeria
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Mission

• To promote cooperation and integration, with a
  view to establishing an economic and monetary
  union as a means of stimulating economic growth
  and development in West Africa

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Literature

• Robert Mundell (1961)Theory of Optimum Currency
  Area
  
• reduction of the various transaction costs
• Trade creation within monetary union
• absence of frequent, large-scale asymmetrical
  shocks and mobility in the factors of production
  
  
• Masson, Debrun, Pattillo (2005)
• Who wins and who loses

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Question

• Looking at intra-regional trade flows to
  determine the likelihood of success as a function
  of degree of integration.
  
• Has Intra-regional trade increased?
• Is ECOWAS an OCA?

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Options

• Have common Currency similar to Euro
• Have pegged currencies against each other and
  against the Euro like CFA Franc
  
• Maintain national currencies
• Euroization

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Economic Model
Transactions Costs
Costs
S
S
D
Trade
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Prediction

• Common currency should promote intra-regional
  trade due to transactions cost reduction
  

Trade
Time
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Variables

• Imports as of GDP
• Exports as of GDP
• Imports Exports as of value with respect to
  Europe
  
• Imports Exports as of value with respect to
  ECOWAS Intra-trade
  
• Dummy variables Francophone, Nigeria, Civil War

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Statistics
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Francophone
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Nigeria
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Civil War
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Conclusion

• Overall intra-regional imports and exports
  diverge
  
• Francophone countries are statistically
  significant.
  
• Nigeria does matter.
• Civil war is surprisingly insignificant