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African Regional Agreements: Impact on Trade with or without Currency Unions

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  • Céline Carrère

Abstract

The aim of this paper is (i) to assess the impact of regional agreements on members' trade in Sub-Saharan Africa (intra-regional trade as well as trade with the rest of the world), controlling for the other traditional determinants and (ii) to compare the respective effect of the preferential trade agreements and the currency unions. Considering the period 1962--96, we first assess the average impact of each regional agreement on their implementation period and second we show how these impacts have evolved. An 'augmented' gravity model is designed, relying on a transport cost function, in which specific dummies allow trade creation and trade diversion effects to be separated. The model is estimated in panel with bilateral specific effects, to isolate the non-observable characteristics of each pair of countries and according to the Hausman--Taylor (1981) method, which takes into account a possible endogeneity of some explanatory variables. During their implementation, the African regional trade agreements have generated a significant increase in trade between members, although initially often through trade diversion. In the two agreements of the CFA franc zone, the currency unions have largely reinforced the positive effect of the corresponding preferential trade agreements on intra-regional trade, while dampening their trade diversion effect. Copyright 2004, Oxford University Press.

Suggested Citation

  • Céline Carrère, 2004. "African Regional Agreements: Impact on Trade with or without Currency Unions," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 13(2), pages 199-239, June.
  • Handle: RePEc:oup:jafrec:v:13:y:2004:i:2:p:199-239
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    Cited by:

    1. Garth Frazer & Johannes Van Biesebroeck, 2010. "Trade Growth under the African Growth and Opportunity Act," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 128-144, February.
    2. Naudé, Wim, 2010. "Development Progress in sub-Saharan Africa: Lessons from Botswana, Ghana, Mauritius and South Africa," WIDER Working Paper Series 007, World Institute for Development Economic Research (UNU-WIDER).
    3. Thierry Verdier, 2010. "Regional Integration, Fragility and Institution Building: An Analytical Framework Applied to the African Context," RSCAS Working Papers 2010/38, European University Institute.
    4. Coulibaly, Issiaka & Gnimassoun, Blaise, 2013. "Optimality of a monetary union: New evidence from exchange rate misalignments in West Africa," Economic Modelling, Elsevier, vol. 32(C), pages 463-482.
    5. Gammadigbé, Vigninou, 2012. "Co-mouvement d'activité dans l'UEMOA: une approche par les corrélations dynamiques
      [Activity co-mouvement in WAEMU countries: an approach based on dynamic correlation]
      ," MPRA Paper 42561, University Library of Munich, Germany.
    6. Samuel Standaert & Glenn Rayp, 2016. "Multilateral trade agreements in Africa," Economics of Governance, Springer, vol. 17(1), pages 11-45, February.
    7. Bezuidenhout, Henri & Naude, Wim, 2008. "Foreign Direct Investment and Trade in the Southern African Development Community," WIDER Working Paper Series 088, World Institute for Development Economic Research (UNU-WIDER).
    8. Michida, Etsuyo & Atici, Cemal & Kojima, Michikazu, 2011. "Does Quality Matter in the Iron and Scrap Trade?," IDE Discussion Papers 282, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    9. Sylvanus Kwaku Afesorgbor, 2013. "Revisiting the Effectiveness of African Economic Integration. A Meta-Analytic Review and Comparative Estimation Methods," Economics Working Papers 2013-13, Department of Economics and Business Economics, Aarhus University.
    10. Cipollina, Maria & Salvatici, Luca, 2007. "EU and developing countries: an analysis of preferential margins on agricultural trade flows," Working Papers 7219, TRADEAG - Agricultural Trade Agreements.
    11. S. Standaert & G. Rayp, 2012. "Regional Integration Agreements and Rent-Seeking in Africa," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/773, Ghent University, Faculty of Economics and Business Administration.
    12. Mohammed Shuaibu, 2015. "Does Trade Tariff Liberalisation Matter for Intra-ECOWAS Trade?," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 8(1), pages 83-112, August.
    13. FE, Doukouré Charles, 2011. "Qualité des Institutions et Commerce International: Évidence à Partir des Exportations de l'UEMOA
      [Institutions Quality and International Trade: Evidence from WAEMU Exports]
      ," MPRA Paper 33333, University Library of Munich, Germany.
    14. Qureshi, Mahvash Saeed & Tsangarides, Charalambos G., 2012. "Hard or Soft Pegs? Choice of Exchange Rate Regime and Trade in Africa," World Development, Elsevier, vol. 40(4), pages 667-680.
    15. Sampawende Jules Tapsoba, 2011. "Union Monétaire en Afrique de l'Ouest: Quelles Réponses à l'Hétérogénéité des Chocs ?," Working Papers halshs-00554309, HAL.
    16. Afesorgbor, S.K. & van Bergeijk, P.A.G., 2011. "Multi-membership and the effectiveness of regional trade agreements in Western and Southern Africa," ISS Working Papers - General Series 22781, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.

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