African Economic Development: Regional Economic Integration
Saturday, Jan. 6, 2018 8:00 AM - 10:00 AM
- Chair: Oladele Omosegbon, Indiana Wesleyan University
Foreign Direct Investment and Economic Size as Drivers of Intra-regional Exports of Manufactured Goods in West Africa: The Case of West African Economic and Monetary Union
AbstractAfrica exports mainly crude product to its main partner countries outside the continent, a trade pattern that exacerbates the vulnerability of its economies as shown by the recent sharp decline in commodity price and how it has strongly weakened growth and jeopardized jobs, fiscal balance and current balances on the continent. This underlines how developing value chains that promote intra-regional export of manufactured goods can be external shocks absorber and develop resilience of African Economies.
Given the low domestic investment rate, the continent in general and in West Africa in particular, relies on Foreign Direct Investment for regional value chain development. Beside investment, another constraint to trade on the continent is poor transport logistics quality.
The paper investigates on the role of Foreign Direct Investment and Economic size of West African Economic and Monetary Union member countries on intra exports of manufactured goods. The econometric analysis uses panel data for the period 1996-2012 covering seven (7) West African Countries. The results of random effects indicate that the level of development measured by GDP as well as FDI have the positive expected sign and significant at 1%, while population has a negative impact at 1% (Lindert Hypothesis).
The Economic Value of Regional Integration in Africa
AbstractThe study examines the economic gains that accrued to African countries that are members of regional integration arrangements over the last 40 years. Economic gains are assessed from three perspectives: enhanced trade, real convergence and welfare gains. Gains from increased trade are measured by way of estimates of trade creation and trade diversion that benefit member countries. The approach of export enhancement through regional integration is compared to the strategy of single country promotion of global exports aimed at achieving higher levels of economic growth as opposed to regional integration strategies. The second value criterion of regional integration aims to examine the extent to which members have levels of income that tend to converge towards the country with the highest per capita income thus giving rise to more income uniformity across the region. The first measure is the evolution over time of the average difference of incomes between the country with the highest income and the incomes of the other members. The second measure is the evolution over time of the standard deviation of rates of growth of the per capita GDP of all member countries.
The hypothesized contribution of regional integration to the welfare of its members is measured with three approaches. First, the rise in per capita income as a result of membership is examined over time and as the integration process deepens. Second, considering that countries prefer lower volatility of their key economic variables, the evolution of the standard deviation of exports of member countries is computed considering that stable export markets and lower volatility of nominal exchange rates could be benefits of regional integration. Finally, the general welfare of residents of member states is assessed over time through the evolution of countries’ respective Human Development Index (HDI) computed
Regional Economic Integration in West Africa: Unsettled Issues?
AbstractThe Economic Commission of West African States (ECOWAS) was established in 1975 with the goal of working towards a monetary union. In spite of some achievements particularly in the area of travel protocols, it appears progress on the economic front seems sluggish. Policy-makers seem to emphasize the need to meet both the primary and secondary criteria for currency convergence. However, citizens in the region have integrated informally as evidenced by the movement of goods and services within the region as well as the exchange of local currencies among the countries. The economies of the member countries are similar – all are exporters of primary commodities. Trade among countries in the region is negligible.
The Franco-phone countries have a common currency (CFA) while the Anglo-phone countries including Guinea have been working towards a common currency since 2002 with the eventual convergence with CFA. The deadline for achieving convergence has been shifted several times within the West African Monetary Zone (WAMZ). The ECOWAS Commission recently set the year 2020 as the deadline for convergence and economic integration.
This paper using a political economy approach examines the journey so far and addresses the question whether there are unsettled issues preventing progress towards economic integration in the West African sub-region. It is expected that the analysis in the paper would provide suggestions on how best to realize and optimize the benefits of economic integration in the region.
Limited Liquidity in Ghana
AbstractThis study examines the relationship between interest rates and money in circulation in Ghana. Due to the relatively large proportion of money holdings in the Ghanaian economy the study hypothesizes interest rate rules have no impact on the real economy. The results here indicate money market liquidity constraints have spanned the gamut of monetary policy ranging from 2000 to 2016. This is important because under these circumstances monetary policy tools are virtually useless. Thus, to examine the international extension of the Taylor Rule (Taylor, 2001), as well as incorporating data from the Central Bank of Ghana and the Federal Reserve Bank of Saint Louis, this study finds evidence the monetary policy instrument has a nonnegative or insignificant impact on money in circulation. The implication is exchange rate policies or fiscal policy, as explained by Cochrane (2017), may perform better in economies like Ghana.
The Significance of Common Currency to the Success of Economic Integration
AbstractThe Economic Community of West African States as one of the regional economic communities in Africa has been struggling with the creation of a common currency since 2003, when the Eco was scheduled to circulate. We have witnessed several postponements since then, the latest being from 2015 to 2020. All agents desire a united West Africa, just like the African Union and its members states desire a developed and united Africa. But if asked about using a common currency, many decision makers run into uncertainties and ambiguities. For many policy makers, the decision of whether to accept a common currency is a big irritation and an embarrassing nuisance. But common currency is a necessary condition for an economic community to exist but not sufficient. After all, without economic union, Africans have been in currency unions before. This fact alone, we show, allows some flexibility for ECOWAS, as indeed other regional economic communities in Africa, to establish a functional common currency that will kick start a rather uninspiring, invariant economic fortune since the colonizing countries of Europe left Africa more than fifty years ago. The ascendancy of ECOWAS countries in the world stage is going to depend on the size of its economy and in the use of its currency as an intervention and an anchor money. This is only possible if ECOWAS, as an economic community, comes to full fruition with a flourishing common money, commanding a widely acceptable internal purchasing power.
- O1 - Economic Development