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Institutions, Infrastructure and East African Community Membership of Burundi and Rwanda on Trade

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  • Abban, Stanley

Abstract

The East African Community (EAC) is in a quest to integrate further to form a currency union. However, empirical evidence has shown that policies initiated as a panacea have failed due to weak institutions. In this background, the study seeks to investigate the role of existing institutions on trade using an augmented gravity model of trade. The Poisson Pseudo Maximum Likelihood (PPML) was used due to its efficiency. Also, the study estimates the impact of infrastructure on trade. Additionally, the study estimates whether Burundi and Rwanda gained from joining EAC in 2009 or rather contributed significantly to trade in EAC. The study showed that institutions are not contributing significantly to trade. Additionally, the study showed that infrastructure had a positive impact on trade. The study also showed that Burundi and Rwanda benefited from joining the EAC by a combined 81%. The study concludes that there is a greater potential to trade therefore an exigency for a new institutional framework and reforms to facilitate trade by reducing trade and non-trade barriers.

Suggested Citation

  • Abban, Stanley, 2020. "Institutions, Infrastructure and East African Community Membership of Burundi and Rwanda on Trade," MPRA Paper 100654, University Library of Munich, Germany, revised 10 May 2020.
    • Handle: RePEc:pra:mprapa:100654
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    Cited by:

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    More about this item

    Keywords

    East African Community (EAC); Currency union; institutions; gravity model of trade; Poisson Pseudo Maximum Likelihood (PPML); infrastructure; trade barriers; non-trade barriers;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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