Economic impact of the african continental free trade area: a combined propensity score matching and difference-in-differences approach to regional integration in Africa

This study examines the economic effect of the African Continental Free Trade Area (AfCFTA) on the GDP per capita of African countries, using a hybrid approach combining propensity score matching (PSM) and the difference in differences method (DiD) to address both selection bias and endogeneity. Our results indicate that, in the short term, the immediate effect of the agreement on GDP per capita is statistically insignificant, with no statistically significant difference in growth between AfCFTA members and non-members after 2019, which diverges from the World Bank's projections and forecasts of the expected effects of the agreement. Nonetheless, principal component analysis (PCA) underscores the significance of economic fundamentals, suggesting that nations with stronger fundamentals are better positioned to benefit from the opportunities associated with AfCFTA. Bootstrap robustness tests corroborate these findings. The results suggest that while the AfCFTA establishes comprehensive trade frameworks, its full economic potential necessitates concurrent structural changes. Consequently, the effective implementation of the agreement requires synchronized policies that address both trade impediments and long-standing institutional and economic constraints.