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Prospect of Economic Unions on Intra-regional Trade in Africa

In: Monetary and Financial Systems in Africa

Author

Listed:
  • Grace Nkansa Asante

    (KNUST)

  • Abban Stanley

    (KNUST)

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.

Suggested Citation

  • Grace Nkansa Asante & Abban Stanley, 2022. "Prospect of Economic Unions on Intra-regional Trade in Africa," Springer Books, in: Aloysius Ajab Amin & Regina Nsang Tawah & Augustin Ntembe (ed.), Monetary and Financial Systems in Africa, chapter 0, pages 369-393, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-96225-8_16
    DOI: 10.1007/978-3-030-96225-8_16
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