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The Prospect Of ECOWAS Currency Union On Intra-Regional Trade

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  • Abban, Stanley
  • Ofori-Abebrese, Grace

Abstract

Currency union is viewed as a panacea for struggling economies with West Africa in their quest to adopt a common currency. However, despite the rattling efforts and measures laid down, the policy seems unrealistic and deemed to fail. The study empirically evaluates whether adopting a common currency in the ECOWAS sub-region will have a substantial impact on trade using data spanning from 2000 to 2017. Also, the study investigates whether adopting a common currency will have a trade creation or trade diversion effect. The study further estimates the trade potential of the ECOWAS sub-region. The study deployed the Poisson Pseudo Maximum Likelihood (PPML) which is the most consistent estimator of the gravity model of trade and addresses issues about panel data. The study showed that adopting a common currency will ensure trade hence economic growth by eliminating exchange rate volatility among member-states. In the background, the sub-region will inure economic and other benefits with initiation of the policy.

Suggested Citation

  • Abban, Stanley & Ofori-Abebrese, Grace, 2019. "The Prospect Of ECOWAS Currency Union On Intra-Regional Trade," MPRA Paper 102226, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:102226
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    Cited by:

    1. Abban, Stanley, 2020. "The impact of institutions and infrastructure on intra-regional trade: The Economic Community of West African States," MPRA Paper 104382, University Library of Munich, Germany.
    2. Abban, Stanley, 2020. "Currency Union as a Panacea for ills in Africa: A New Institutional Framework and Theoretical Consideration," MPRA Paper 105459, University Library of Munich, Germany.

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    More about this item

    Keywords

    Currency union; trade potential; trade creation; trade diversion; Poisson Pseudo Maximum Likelihood (PPML);
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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