Microsoft Word - an evaluation-writer2-new An C Op Receive doi:10.5 This pa Technol AIT and very use Abstra Single c the sub champi of singl panel D intra-tra bilatera substan that EC cultural Keywo n Evalu Commu Scho pen Univers ed: October 5296/ajfa.v4 aper is bas logy (AIT) d participan eful. ct currency fo b region’s on of the in le currency Dynamic O ade potentia al potential i ntial intra-tr COWAS di l to improve rds: Gravity uation o unity o ool of Busin sity, Malays r 18, 2012 4i2.2541 sed on my Campus, A nt of 2nd In or West Afri problems. ntroduction is to impro Ordinary Le al within W in ECOWA rade potenti iversify its e intra-trade y model, In of Intra f West An ness, Univer sia (Accra I E-mail: an Accepted URL: http y Ph.D thes ccra Ghana nternational ica countrie Attentions of single cu ove intra reg east Square West Africa AS using tim ial between export bas e. ntraregional 314 a-Trade Africa nokye M. Ad rsity of Cap & Institute of T no77chie@y d: Novembe p://dx.doi.or sis at Ope a. Suggesti l Istanbul F es has been of past a urrency. To gional trade e (DOLS) a within the me series dat n the two m se and dee trade, Trad Asian e Potent an State dam e Coast, Ca Technology yahoo.co.un er 6, 2012 rg/10.5296/a en Universi on from Do Finance con revered as and present op of the rea e. The study to empiric e gravity m ta from 198 monetary un epen integra de potential n Journal of F tial in E es (ECO ape Coast, G y Campus), Published: ajfa.v4i2.25 ity, Malaysi octoral sem ngress, 13-1 the solution t governme ason for the y employs th cally inves model frame 0 to 2010. T nions. The ation not o Finance & Ac ISSN 19 2012, Vol. www.macrothi Econom OWAS Ghana Accra, Gha : December 541 ia, Accra minars comm 14 June, 20 on to a great ent have b e proposed a he gravity m stigate the ework. It e The study o study recom only econo ccounting 946-052X 4, No. 2 ink.org/ajfa mic ) ana r 1, 2012 Institute mittee at 012 were t deal of been the adoption model in size of xamines observed mmends mic but 1. Intro Regiona allow fo movem of comp to cope develop changes necessa these st West A instituti Econom regiona trade m In parti particul commer The abo area an restricti market and the and mo ECOWA these go designa have al complet WAEM Cote d’ pegged Ghana, Moneta history and Sie issuing establis The goa line wit State an oduction al economi for the free ment of perso parative adv with globa pment. As m s in the glo ary conditio trategies. African cou ional objec mic Comm al-based sch market and th cular its mi larly indust rce, moneta ove mentio nd a custom ions to trad (eliminatio e creation o netary polic AS for the oals: tariffs ated goods, so been ado ted althoug MU - West ’Ivoire, Gui to the euro Guinea, Ni ary Zone (W of two mon erra Leone h currency shment of fo al is to mer th the two t nd Governm ic integratio flow of ide ons within t vantage and al economic many count obal econom ns for susta untries hav tive is to munity of W heme of dev he adoption ssion is to p try, transpo ary and fina ned goals s m union (e de; establish on of all ob of an econo cies, establi past three on intra re reduction o opted. The gh some ste African Ec inea Bissau o and is gu igeria, and WAMZ). Th netary unio had the Wes in these c ormal centr rge with WA track approa ment of EC on, which eas, investm the region in d economies problems a tries are not my, groups ainable grow e a long-s foster coop West Afric velopment n of macroe promote eco rt, telecomm ancial questi should be a elimination hment of a stacles to th omic union shment of a decade has gional trade of custom d achievemen eps have be conomic an u, Mali, Nig uaranteed by Sierra Leon he antecede ns: the form st African C countries. T al banks aft AEMU, giv ach to integ COWAS m 315 is an agree ment funds, n which a si s of scale h and partly to t strong eno of countrie wth and dev tanding tra peration an can States, in West Af economic po onomic inte mmunication ions, social achieved thr of custom common ex he free mov (harmonisa a fund for co s made imp e have been duties and E nt of free m een made a nd Monetary ger, Senega y the Frenc ne announc ents to this mer British Currency Bo The curren fter indepen ving West A gration in th member stat Asian ement amo technology ingle large has gained m o enhance d ough on the es use regio velopment. W adition of g nd economi was foun frica, throu olicies enab egration in “ ns, energy, and cultura rough the im m duties, qu xternal tarif vement of p ation of eco ooperation portant step n consistent ECOWAS p movement o also in this y Union – l and Togo ch Treasury ed their int s are not ne colonies of oard, which cy board dence, from Africa a sin he sub-regio tes held in n Journal of F ng neighbo y, goods and market exis momentum domestic eco eir own to c onal integra West Africa gathering i c integratio nded in 19 ugh the crea bling a susta “all fields o agriculture, al matters. mplementat uantitative ff), the crea persons, ca onomic, agr and develop s towards t tly reduced. assport / tra f labour is direction. gathers Be . Its extern . In April 2 ent to creat ew as Wes f The Gamb h had the so existed fro m the late 19 ngle stable c on agreed in Lome, Tog Finance & Ac ISSN 19 2012, Vol. www.macrothi ouring coun d services, sts with the partly as a onomic gro cope with th ation to ach a is no exce into groups on. ECOW 975 to pro ation of a c ained devel of economic , natural re tion of a fr and admin ation of a c apital and se ricultural in pment). the achieve . Free move avelling do still far fro Within EC enin, Burkin nal exchang 2000, The G te the West st Africa ha bia, Ghana, ole responsi om 1912 u 950s to ear currency. T n 1999 by H go. The pu ccounting 946-052X 4, No. 2 ink.org/ajfa ntries to and free benefits strategy owth and he rapid hieve the eption to s whose WAS, the omote a common lopment. activity, esources, ree trade nistrative common ervices), ndustrial ement of ement of cuments m being COWAS, na Faso, e rate is Gambia, African as had a Nigeria ibility of until the ly 1960. This is in Heads of ursuit of regiona member as to str For Afr perform and in intra-re facilitat of macr Trade h instance objectiv of a cu increase those o (WDI,2 intra-tra introduc Vicarel the intro currenc gained the dev policy e custom WAEM restricti tariff cr higher implem process trade di ECOWA ECOWA WAEM these an customs harmon the regi In view signific currenc al integratio r countries rengthen th frica, integr mance and s nstitutional gional trad te higher lev roeconomic has always b e, Krueger ves of ECO ustom unio ed consisten of other A 2010). How ade share is ction of the li (2008) ha oduction of cy. The road momentum valuation of effectivenes union. The MU custom u ions on intr reating effe than in an menting trade s both for re iversion effe AS countri AS were su MU to ECOW nd other se s and inspe nisation of t ion. w of these cantly impro cy union to r on trace its and facilita he economic ration is al strengthenin initiatives de, develop vels of inve c policies. been a majo r 1990, Gr OWAS as no on. This ha ntly from 3 African Re wever the s about 60% e single curr ave also pro f the Euro. T d to trade in m in nineties f the CFA F ss, made a e non-WAE union has b ra-regional t ctively a cu ny other reg e liberalisat eaping the b fect that is e es has been ubject to th WAS were everal facto ection proce the national e challenge ove the rat reduce trans roots from ate market a c power of so a devel ng of policy towards r p regional estment and or compone rossman an oted has be as yield po % in 1970 egional Tra level of in % thanks to rency (Balw ovided enou This has giv ntegration ha s with the W Franc in 199 decisive st EMU howev een strength trade creatin ustom union gion in Af tion in the r benefits of h embedded in n subjected he common subject to ors are con edures, corr l regulatory es, the amb e of intra-r saction cost 316 m a desire access and g the combin lopmental n y credibilit regional in infrastructu d industriali ent of the e nd Helpman een the prom ositive resu to almost 1 ade Agreem ntegration i a significan win, 2008). ugh eviden ven various as been slow WAEMU co 94 with the tep towards ver pursued hened throu ng a free tr n. The lev frica. More region attrac higher trade n any free t d to substan n WAEMU country spe nstraining it ruption, ina y framework bition of t regional tra t and impact Asian to minimi growth for t ned member necessity in ty and effec ntegration, ure, impro isation and economic de n 1990). O motion of in ults with sh 11% in 200 ments such is far below nt reduction The study b nce of EU in s trade bloc w in the We ountries rev aim of boo s stronger tr d a looser f ugh the rem rade area an vel of intra- over the sl cted other E e and for av rade area. ntial trade b external ta ecific impo ts effective appropriate ks, and inte the ECOW ade in the l t of exchang n Journal of F se the cost the region’s r states vis- n relation t ctiveness. W there is s ve adminis reduce poli evelopment One of the ntra-trade th hare of intr 08, which is h as COM w that of n in trade co by De Na ntra-trade p s the hope a est Africa. T ising Coton osting regio rade integra form of trad moval of tari nd adopted a -regional tr low but ste ECOWAS c voiding to b Trade betw barriers. Go ariff; by con rt tariffs. implement taxation, la ense compe WAS leader long term t ge rate vola Finance & Ac ISSN 19 2012, Vol. www.macrothi t of trade b s industries, -`a-vis third to trade, ec With organi scope to strative eff itical contam t of nations e major ec hrough the ra-ECOWA s not differe MESA and the Europe osts as resu ardis, De Sa positive resp and need fo Trade libera nou Treaty. onal integra ation by cr de integrati iffs and qua a common rade in WA eady progr countries to be penalised ween WAE oods import ntrast expor It worth no tation: bure ack of sub- etition from rship had through cre atility. ccounting 946-052X 4, No. 2 ink.org/ajfa between , as well d parties. conomic isational increase ficiency, mination (see for conomic creation AS trade ent from SADC e whose ult of the antis and ponse to or single alisation Besides tion and reating a ion. The antitative external AEMU is esses in join the d by the MU and ted from rts from oted that eaucratic regional m outside been to eation of In April to creat West A Senegal (WAEM Howeve tariff b taxation compet Commi been ci through highly c ECOWA concent reveals exports import manufa to whet The bas coincid existenc trade w Similar potentia ECOWA Recogn countrie previou intra-tra The stu literatur ECOWA literatur to deal the par informa underly The cu unobser l 2000, The te the West African cou l and Togo MU) to facil er, the regi barriers, bur n, lack of s ition from o ission for A ited as the h export co concentrate AS, which tration inde that its ex more than more than actured good ther these co sic theory o ence of wa ce of unexh within the blo concern ha al in the EC AS bloc w nising the im es for policy us studies i ade potentia udy contribu re in sever AS and int re. The exis with endog rameter est ation about ying dynami urrent study rved heterog e Gambia, G t African M untries (Ben o) that are m litate the int on is const reaucratic c ub-regional outside the Africa(UNEC major caus oncentration ed given cre is 69.36 ex of 78.07. xport is co n three time n six times ds accounts ountry can m of economic ants. The r hausted intra oc may low ad been expr COWAS. Th which faile mportance y formulati in dealing al among th utes to the g ral ways. T tra-ECOWA sting estima genous in gr imates. It t the earlie ics may be y employs geneity amo Ghana, Guin Monetary Zo nin, Burkina members of tegration. raint by bo customs an l harmonisa region and CA), 2010) se of low i n index pre edence to th from 2006 An exam ncentrated es of primar the volum s for more t meaningful cs posits tha relevance o a-trade pote wer but level ressed by O he study inv d to revea knowledge on especial with the e ECOWAS general bod The study AS trade po ated intra-E ravity mode is rare for r times and obscured b dynamic p ong cross se 317 nea, Nigeria one (WAM a Faso, Co f the West oth legal an nd inspectio ation of the d homogene . Specific intra-West esented in T he earlier li -2009 is o mination of on primary ry commod me of manu than 65% o trade amon at meaningfu of the com ential within l of intra-tra Ogunkola (1 vestigated tr aled the in of individ ly as they g issues; this S members. dy of know explores b otential usin ECOWAS tr el estimatio r single cro d aggregat by aggregati panel estim ectional uni Asian a, and Sierra MZ) with int ote d'Ivoire, African Ec d policy fra on procedu e national re eity of expo cally, low ex Africa trad Table 1 sho iterature. Th only compa import and y commodi dities as com ufactured g f ECOWAS ng themselv ful trade can mmon curre n the ECOW ade which is 998) which rade potenti nter-countrie dual trade p gear for the s study the . ledge by fil both intra-c ng gravity m rade potent on which ca oss-section e time seri ion biases ( mation whic its. n Journal of F a Leone ann tention of m , Guinea-Bi conomic an amework w ures, corrup egulatory fr rts (United xport divers de (Odularu ows that E he export c arable to th export stru ities (see T mpared to t oods expor S total impo es. n only take p ency to intr WAS bloc ot s paramoun h lead to the ial of indivi es potential potential wi currency un erefore see lling the vo ountry trad model whic ial by Ogun asts doubt o survey to ies data ha Bond, 2002 ch addresse Finance & Ac ISSN 19 2012, Vol. www.macrothi nounced the merging wi issau, Mali nd Monetary which includ ption, inapp frameworks, Nations Ec sification in u, 2009). A ECOWAS e concentratio he CEMAC ucture of EC Table 2). T those impor rted. Howe ort raising d place when tra-trade hin therwise the nt will rema e evaluation idual countr al within th ith other in nion and fa eks to expl oid in the a de potential ch is missin nkola (1998 on the magn provide su ave possibi 2; Shepherd es the cont ccounting 946-052X 4, No. 2 ink.org/ajfa eir intent ith eight i, Niger, y Union des high propriate , intense conomic ndex has A glance export is on in the C export COWAS The bloc rted and ever, the doubt as n there is nges on e cost of in same. of trade ries with he bloc. ndividual ailure for lore the cademic l within ng in the 8) failed nitude of ufficient lity that d, 2008). trols for The res method five. Table 1 Tr A M A CA CA CE CE C EA EC EU N SA SA U Source: U Table 2 Commod SITC 0+ SITC 0+ SITC 0+ SITC 3 SITC 5+8 Source: C st of the st dology and D . Export Tr rade Bloc Arab Com Market ASEAN ACM ARICOM EFTA EMAC OMESA AC COWAS U27 NAFTA AARC ADC UEMOA UNCTAD, 20 2. Structure dity Classifica 1+2+3+4+68+ 1+2+3+4+68 1+2+4+68 8 less 667 and Calculated fro tudy is org Data at sect rade Concen Expor conce index 1995- mmon 57.88 20.05 28.44 37.80 15.30 63.69 44.02 32.13 75.45 8.95 9.54 17.12 32.87 40.53 011 of ECOWA ation +667+971 d 68 om UNCTAD- anised as f tion three. T ntration Inde rt product entration x E c in -1999 2 8 6 5 2 4 2 0 4 0 1 9 7 2 4 3 3 5 7 1 9 2 1 7 3 3 4 AS Commod -WDI Statistic 318 follows; sec The section ex of variou Export produ oncentration ndex 2000-2004 62.28 20.72 21.40 42.37 16.63 72.45 46.93 30.94 75.67 10.18 9.68 16.17 34 41.15 dity Export Ex 3.5 3.4 1.4 6.7 0.1 cs, 2011 Asian ction two l takes the re us Trade Bl uct Export concentr index 2005-200 59.72 18.86 20.88 45.55 14.54 76.63 46.76 27.74 68.85 9.85 9.21 16.84 35.04 40.07 and Import port/ Import 55 45 42 76 15 n Journal of F ooks at the esults and c ocs(1995-20 product ration E con ind 08 20 56 21 16 43 14 78 43 28 69 24 9. 9. 35 42 t, 2010 % o 33 33 21 13 65 Finance & Ac ISSN 19 2012, Vol. www.macrothi e literature concludes at 009) Export produ ncentration dex 006-2009 6 1.05 6.99 3.63 4.38 8.07 3.60 8.23 9.36 4.89 75 35 5.33 2.28 of Total Impo ccounting 946-052X 4, No. 2 ink.org/ajfa review, t section uct rt 2. Liter There is decades the Int Proença Kennan Longab Africa i all con achievin coordin looked within t based o Univers function (1962) econom countrie study th trade b decreas Where ijT = as a cou iM an bilatera ijD = t the dest G =con The ass country while sm rature Revi ssue of intr s resulting i tra-ECOWA a,2005)), S n ,2010), baugh, 2008 in particular clude that ng its objec nation in gen at regional the zone. In on the grav sal Gravitat n of the ma proposed t mic factors o es, and eco he determin between a p se as the tran trade flows untry’s expo d jM = t al trade flow the econom tination cou nstant. sumption is y can trade w maller coun iew aregional tr in number o AS (Ogunk South Asia Southern 8) and Afric r have been the experie ctives of in neral. The s l level pote n terms of m vity model. tion”, whic asses of the o apply Ne on trade ch onomic forc nants of int pair of cou nsaction cos s from orig orts, import he econom ws. mic force tha untry; it is u s that the ec with all its ntries tend to rade have be of works fro kola,1998), (Wadhaw, Africa (Si a (UNECA n slightly va ence of reg ncreasing in studies mig ential and f methodolog The gravity h states tha e objects an ewton’s law hanges. He es that affe ternational untries shou sts increase ijT in country s or total tra mic forces o at negatively sually repre conomic siz trading part o trade less. 319 een an imp om number European , 2009), imwaka,201 A, 2010). T ary, the gen gional inte ntra-regiona ght have suf failed to lo gy, the anal y model ha at the force nd the dista w to interna used econo ect trade flo trade flows uld increas e. The mode ij i ij D MM G i to destin ade value. of the two y affects tra esents chang ze of a trad tners. There . Asian ortant part o r of regiona n Union (M sub-Saharan 10; Haggbl The empiric eral conclus gration in al trade in p ffered from ook at intra yses of all as been der e of attract ance betwee ational trade omic forces ows betwee s. Thus the e as their el can be exp jM nation coun countries t ade flows b ges in transa ding country efore, larger n Journal of F of the acade al blocs trad Martínez-G n Africa ( lade, Jayn al evaluatio sion seems Africa has particular an aggregate b a-country le empirical li rived from N ion betwee en the two e flows to s of the orig en the two s e model pre economic pressed as f ntry j ; usu hat have a between the action costs y usually de r countries Finance & Ac ISSN 19 2012, Vol. www.macrothi emic for nu de potential Galán,Fontou (Keane, Ca ne, Tschirle on of intra-r to be simila s been a fa nd fostering biases as th evel trade p literature ha Newton’s “ en two obje objects. Ti study the e gin and des sets of coun edicts that sizes incre follows: ually it is ex positive e origin coun s. ecides how tend to trad ccounting 946-052X 4, No. 2 ink.org/ajfa umber of such as ura and alì and ey, and regional, ar. They ailure in g policy hey have potential ave been “Law of ects is a inbergen effect of stination ntries to bilateral ease and (1.2) xpressed ffect on ntry and much a de more, Previou positive Accord internat found t tradition Assumi trade sh the exp relaxing Bergstr from a from su partner. foundat endowm Hecksch Varying compet (1998) assumin the theo 3. Meth 3.1 The The mo from th Where 0 their uti us literature ely affect a ing to De tional trade that the gr nal Hecksc ing identica hares in eac penditure fu g many assu and (1985) general equ upply and d . Bergstrand tion. He em ment level a her-Ohlin m g models ition model and Anders ng that each oretical foun hodology an e Gravity Mo odel develo he utility of a ijq is the the elasticit ility subject e justifies t country’s tr eardorff (19 e theories h ravity equat cher-Ohlin al homothet ch country, unction to s umptions fro theoretical uilibrium fra demand side d (1989) ex mploys tradi and taste pr model and L stemming ls as well as son and van h country is ndation of th nd Data Model oped here is a representa consumpti ty of substi t to the subj the role of rade flows ( 998), theor has been gr tion is con model (H-O tic preferen Anderson ( study differ om the Cob lly justifies amework by es based on xtending hi ing partners reference to Linder hypo from diffe s product di n Wincoop ( specialized he gravity m s the varian ative consum      j iU ion by cou itution betw ect constrai Y 320 GDP in th (Anderson 1 retical just radually str nsistent wit O model) o nces for com (1979) theor rentiated tra bb-Douglas s the gravity y setting up n the assum is earlier w s’ per capit o test wheth othesis. erent gener ifferentiatio (2003) have d in a single model. nt of Sousa mer in coun      11   ijj q untry i con ween goods int  j iji qp Asian he gravity 1979; Bergs tification fo rengthened th internati or imperfec mmodities retically jus aded goods production y model in p a world tra mption of a work in 198 ta income t her the gra ral framew on models h e also justifi e good. This a and Loch ntry i , which   1    nsumers of . The consu n Journal of F model and strand 1989) or the gra since the onal trade ct competit across coun stified the g in a group function. n a microec ade general single fact 85 based on to represent vity model works inclu have been d ied theoretic s probably c hard (2003). h is assumed f goods fro umers in co Finance & Ac ISSN 19 2012, Vol. www.macrothi d GDP is f ). avity mode 1990s. It h theories b tion trade t ntries and d gravity mod p of countr conomic fou l equilibrium tor for each n a microec t a country’ is in line w uding mono developed. D cally the gr closes the cu . The mod d to be om country ountry i m ccounting 946-052X 4, No. 2 ink.org/ajfa found to el under has been ased on theories. different del using ries, and undation m model h trading conomic ’s factor with the opolistic Deardoff ravity by urtain of del start (3.1) j and maximise (3.2) With Y in coun price re Where that eac transit. Therefo It is dec income From eq Combin iY the incom ntry i . Assum eceived by s ijc is the c ch good tr The result o ore, the valu creasing in is income i quation (6) ning equatio me of country ming that t seller in j b cost of trade ransported of the consu ij p q ue of import ijc if  is equal to t Y we obtain t on (5) and e y i and p rade costs a be e. Assuming from count umer utility   ( (1       j i ij p Y p t of country ij YM 0 . The ma the importer  i ijj MY the equilibri j p( equation (7)        i ij c YY M 1 321 ijp the price are borne b ijiij cpp  g an iceberg try j to co maximizati     1 ) ) 2         ijj ij p p y i from co        ijjj i i cp p Y arket cleari r i spendin      ji iY ium scaled p  ij j Y p  1 ) gives         i ij j Y Y 1 Asian e of good fr by seller an g form for t ountry i , a ion problem  ountry j i      ing conditio ng:      ijjj i cp p prices:          ij ij i c p Y            ij ij i c p P n Journal of F rom country nd take the trade costs a proportion m is: s given by: on implies t Finance & Ac ISSN 19 2012, Vol. www.macrothi y j for con ‘iceberg’ fo amounts to 1ijc “m that the exp ccounting 946-052X 4, No. 2 ink.org/ajfa nsumers orm, the (3.3) suppose melt” in (3.4) (3.5) porter j (3.6) (3.7) (3.8) We can Taking Where iY , ED iED is t is th The pr determi 3.2 ECO Intra-EC section predicte the futu one, it i n rewrite equ logarithm o tijM ln , ijM is the jY is the G ijd is the tr jD is expor export con he error term ropose mod inant. OWAS Intra COWAS tr to predict ed by the m ure direction implies a po uation (8) a Le of equati iY  ln21 e volume of GDP of coun rade barrier rt concentrat ncentration o m del for thi a-Trade Pot rade potent trade, with model ( XP ) t n of trade f otential for e s M Where et (ln fc  ion and subs jti YY  ln ,3, bilateral tra ntry i and r between tion index o of the host is study ta tential ial is analy h rest of t to actual/ob for ECOWA expansion o 322        ij i ij c YY GM 1       iY P G ,ln  iij EDd stitute equa ijt d ln4, ade between county j country i of partner co country akes the fo ysed using the countrie bserved trad AS. If the v of trade with Asian        j jY 1         ij ij c p P ),  jED ation (10) gi iED ln5 n country i and county ountries form (3.11) the model es in the s de ( XA ), ( XP value of ( P h that partic n Journal of F ves i ED ln5 and country y j ) to estima estimates ample. The XX AP / ) is th XX AP / ) for cular country Finance & Ac ISSN 19 2012, Vol. www.macrothi tjD  y j ate the int from the p e ratio of t hen used to r a country ry exist. ccounting 946-052X 4, No. 2 ink.org/ajfa (3.9) (3.10) (3.11) (3.12) tra-trade previous trade as analyze exceeds 3.3 Esti Since th panel e the prob time se econom squares forecast A num differen confron equilibr long-run preferre Howeve have lo Since th informa obtaine Kao (19 and Gra levels re panel c estimate Pedroni Mark an method serial c unbiase errors b the regr standard and DO the FM favour cointegr relation by lead feedbac 1 See Ca imation Tec he data con stimation th blem of stat eries are n metric theory s cannot be ting perform mber of met nces of the s nted with a rium. As lon n relationsh ed method e er, it has be ow power a he time seri ation set. Th d. 999), and P anger (1987 egression. T cointegration e the long r i (2000) pr nd Sul (200 ds of panel c orrelation t ed estimator by augment ressors in f d errors tha OLS estimat MOLS estim of panel ration equat n with Kao-A d and lagge ck (Saikkon amareroy & T chnique nsidered va hat takes tim tionarity in not stationa y shows, wh e applied b mance. thods are s series and t a new prob ng as the fir hip between estimation t een widely a against stati es dimensio herefore, ga edroni (199 7) framewor The present n. Since th run relation roposes full 01) recomm cointegratio o the OLS r of the lon ting the stat first differen at can be use tors have no mator especi DOLS est tion which ADF test. ed differen nen,1991). L Tamarit (2002 ary both ov me series p econometri ry. That is hen the var because the suggested t hen putting blem; loss rst differenc n these varia time series acknowledg ionary alter on is extend ains in pow 99, 2004) pr rk, which in study empl ese tests on nship, appro ly modified mend the dy on estimatio estimator. T ng-run para tic regressio nces. Both ed for infere ormal limiti ially in sma timation, th relates direc In the DOL nces of the Lead and la 2) for strength 323 ver time an properties o ics studies. s, their me riables are n ere might to solve th g them into of informa ces of the v ables becom data becau ged that stan rnatives. Pa ded by the c wer are expe roposed pan ncludes testi loyed Kao( nly detect t opriate meth d ordinary ynamic ordi on. FMOLS To correct f ameters, DO on with lea FMOLS an ence. Accor ing properti all samples he DOLS ct intra-trad LS framew explanator agged diffe h and weakne Asian d across co f the data i Empirical ean and va non-stationa be a spuri his problem regressions ation that i variables are mes impossi use of the w ndard unit r anel tests m cross section ected, and m nel cointegr ing the stati 1999)1 AD the presenc hod should least squar inary least s S estimation for the endo OLS uses a ads, lags, an nd DOLS p rding to Ka ies, and the s. On the b method is de after iden ork, the lon ry variables erences of t ess of the test n Journal of F ountries, the nto conside l studies sho ariances dep ary, the stan ous regress m. One of t . However, s importan e used, dete ble. Cointeg weakness of oot and coin make progre n, inference more reliab ation tests s ionarity of t F test to det ce of cointe be employe re (FMOLS squares (DO n corrects fo ogeneity bia parametric nd contemp provide cons ao and Chian e DOLS esti asis of the s used to ntifying the ng run regre s to contro the depende t. Finance & Ac ISSN 19 2012, Vol. www.macrothi e study con eration. Thi ow that mo epend on ti ndard ordina sion which them is tak in this case nt for the l ermining a p gration has f the standa integration t ess in this e relies on a ble evidence similar to th the residual etect the pre egration but ed. In this d S) estimatio OLS) as alt for endogen as and to o c adjustmen poraneous v sistent estim ng (2000), imator outp earlier find estimate l panel coint ession is aug ol for endo ent variable ccounting 946-052X 4, No. 2 ink.org/ajfa nsidered is brings st of the ime. As ary least h affects king the e we are long-run potential become rd OLS. tests can respect. broader e can be he Engle s from a sence of t do not direction on while ternative neity and obtain an nt to the values of mates of FMOLS performs dings in long-run tegration gmented geneous e can be include equation Where p (AIC, B root com the expl 3.4 Dat The dat study u ECOWA Guinea, These (IMF-D on Tra Organis regressi bilatera (0.0000 at best a 4. Estim As requ series v series Phillips conduct Pesaran employ observe appropr results g regressi Table 3 estimate cointegr among 2 The unit 3 The resu d to accoun n p is the lag BIC). Equat mponent fro lanatory var ta Collectio ta for this ses annual b AS countri , Guinea-B data were DOT)/Intern ade and De sation (WT ion. All the al trade wer 01) to all tra and is comm mation Res uired for e variables we and pooled s-Perron (PP ted on the 2 n and Shin yed for test ed nonstatio riateness of gave eviden ion3. 3 presents K es of gravit ration is fai the variabl ts root results a ults is available nt for seria g length with tion (5) is th om the regr riables to th n study is se bilateral tra ies (Benin, Bissau, Libe e obtained national Fina evelopment TO). The n variables u re corrected ade flows. T monly used ults econometric ere examin d (panel) P) test, the 256 individ test (2003 cross-secti onarity in th f pooling th nce of effici Kao (1999) P ty models fo iled to be a les under c are not reported e on request al correlatio XZ   hin a releva he DOLS re ression by s he OLS regr condary da ade, GDP , Burkina F eria, Mali, from Int ancial Stati t (UNCTA necessary tr used in the s d using the Though the in the polic c analysis, ed, using th data sets e Kwiatkow dual data ser 3), the Bre ional indep he datasets2 he cross-se iency in po Panel Coint for all the co accepted ind onsideration because of the 324 on (see Stoc p pi X     ant range to egression. T imply addin ression ata covering data and o Faso, Cape Niger, Nig ternational stics (IMF- AD), UNCO ransformati study entere e ad hoc m approach h cy literature stationarity he availabl The Augm wski, Phillip ries and the eitung test pendent pan 2. Also Cho ection param oling the cr tegration tes ountry. Tab dicating the n. The pan size but is avai Asian ck and Wa titX   o determine The DOLS ng leads and g a period o other social e Verde, Cô geria, Seneg Monetary IFS) databa OMTRADE ion is done ed in as natu method by a has no theor e (Shepherd, y/non-statio e unit root mented Di ps, Schmidt e Levin, Lin (2000) and nel unit roo ow poolabil meters as a ross-section st while Tab ble 3 shows e presence w nel estimate ilable on reques n Journal of F tson, 1993) by some in specificatio d lags of th of 31 years and econom ôte d'Ivoire gal, Sierra Fund -D ase, United database e to avoid ural logarith adding sma etical basis ,2009) narity prop tests for bo ckey-Fuller t, and Shin n and Chu t d the Hadri ot tests. Th ity test was against indi n parameters ble 4 presen that the nu with cointeg es with each st. Finance & Ac ISSN 19 2012, Vol. www.macrothi ). In particu nformation c on removes he first diffe s (1980-201 mic indicato e, Gambia, Leone and Direction o Nation Con and World d possible s hm. The zero all positive but is appr perties of t oth individ r (ADF) t n (KPSS) te test (2002), i test (200 he results g s conducted ividual mod s against in nts the pane ull hypothes gration rela h of the co ccounting 946-052X 4, No. 2 ink.org/ajfa ular, the criterion the unit rence of 10). The ors of 15 Ghana, d Togo). of trade nference d Trade spurious os in the number roximate the time dual data test, the est were , the Im, 0) were generally d for the dels and ndividual el DOLS sis of no ationship ountries’ A bilatera explain The var all the signific are both bilatera with tra and par credenc Africa a Table 3 ADF T-stat Prob. B-Benin, GB-Guin ** Table 4 Host Cou Benin Burkina F Cape Ver Cote D'Iv Gambia, Ghana Guinea Guinea B Liberia Mali Niger Nigeria Senegal Sierra leo Togo Source: A al trade flow 45.1% and riables are a countries. cant except h positive b al trade in E ade literatur rtner country ce to Odula as whole is . Kao (1999 B BF -3.58 -4.29 0.005 ** 0.000 ** , BF-Burkina nea Bissau, LB 4. DOLS Pan unry(i) R G 2. Faso 2. rde 3. voire 2. The 3. 1. 2. Bissau 3. 2. -2 0. -4 1. one 0. 0. Athour’s Calc w with the d 99.6% of also genera The GDP for Mali w but insignifi ECOWAS an re. The trad y shows ne aru(2009) a homogenei 9) Panel Co CD CV 9 -3.59 -5.4 0 0.000 ** 0.0 ** a Faso, CV- B-Liberia, M-M nel Cointeg Regressors GDPi GD .303* 1.7 .36* 4.5 .156* 3.5 .007* 0.9 .901* 1.4 .621* 2.6 .172* 1.3 .929* 1.5 .252* 1.5 2.335* 5.7 .048 3.4 4.03 2.7 .618* 0.8 .287 3.3 .606* 2.1 ulation, 2012 e rest of EC the variatio ally correctly P variables which is sign icant. The im nd distance de facilitati gative and and UNECA ty of export ointegration V GA G 46 -2.63 -6 00 0.004 ** 0. ** -Cape Verde, Mali, N-Niger gration of Gr DPj Distan 96* -2.836 71* -6.807 19* -5.980 36* -1.249 88* -4.037 01* -3.207 62* -2.381 66* -4.641 21* -2.329 44* -2.952 61* -2.498 64* -0.208 35* -0.629 40* -3.517 99* -1.331 325 COWAS c on in bilate y signed. T for host an nificant neg mplications e or barriers ion indicato significant A(2010) cl t. Test GH GU 6.00 -3.28 .000 * 0.001 ** , CD-Cote d r, NG-Nigeria Gravity Mod nce EDI 6* 1.649 7* 24.550 0* 18.907 9* -1.422 7* 0.530 7* -13.53 1* -7.312 1* -4.129 9* -1.164 2* 5.703 8* 0.0914 81 5.687 9* -0.308 7* 9.029 1* -3.179 Asian ountries ge eral trade ac The distance nd partner gative and t s are that ec s impede bil or, exports effect on m aim that th GB LB -1.69 -2.44 0.045 ** 0.007 ** d’Ivoire, GA a, SG-Senegal del EDJ * -4.802 0* -12.82 7* 2* -0.265 0.0787 30* -6.675 2* -3.705 9* -14.34 4 -6.046 * -14.66 4 -8.386 * 1.377 82 1.6304 * -16.39 9* -0.632 n Journal of F enerally fit cross our sa e is negative countries a then Niger conomic exp lateral trade concentrati most of the c he problem M N -2.48 -1.61 0.006 ** 0.05 4* -Gambia, GH l, SL-Sierra Le Diagn Adjus 2* 0.996 20* 0.813 0.535 5* 0.990 7 0.796 5 0.888 5* 0.970 42* 0.451 6* 0.588 61* 0.997 6* 0.997 * 0.982 4 0.983 98* 0.886 2 0.863 Finance & Ac ISSN 19 2012, Vol. www.macrothi the data w ample of co e and signif are all posit and Nigeri pansion is g e. This is co ion of host countries. T of ECOW NG SG -3.28 -3.98 0.001 ** 0.000 ** H-Ghana, GU eone, TG-Tog nostic Statistic sted R2 D- 2.0 1.9 2.0 2.0 1.9 1.9 1.9 1.9 1.9 2.0 1.9 1.9 2.0 1.9 2.0 ccounting 946-052X 4, No. 2 ink.org/ajfa well and ountries. ficant in tive and ia which good for onsistent country This lend WAS and SL TG -2.26 -2.4 0 0.012 ** 0.00 ** U-Guinea, go cs -W stats 019 958 047 090 933 967 973 937 990 045 978 976 043 960 028 40 08 4.1 Intr Having proceed section potentia analyze exceeds country country looks b true for due to timing o country mis-attr The stu partners a green Table 5 between between countrie also hav the WA countrie as a det zone. ra-ECOWAS estimated d to estimat are used t al (P) as pre e the future s one, the i y. Table 5 y’s potential bit confusing r the reverse discrepanci of export/im y attribution ribution and udy therefor s in ECOW n field whic 5 shows a n WAEMU n the two es were init ve low trade AEMU show es raising th terminant o S Trade Pot the gravity te intra-ECO to predict i edicted by e direction mplication give the i l with each g but that is e because o ies in recor mport, shipp n & treatm d smuggling re presents t WAS. The po h need to b considerab U countries blocs with tially attrib e potential ( ws Guinea he issue of of intra-trad tential y model for OWAS trad ntra-ECOW the model t of trade f is in terms intra-trade p of the ECO s the case. of difference rding of bil ping & insu ment of pr g. trade potent otential of m be exploited ble trade po and WAM hin ECOW uted to com (see Tables Bissau see colonial ex de because G 326 r bilateral t de potential WAS trade to the actua for intra-EC s of potentia potential in OWAS coun The trade e in bilatera lateral trade urance cost, rocessing tr tial of each more than 10 d and is rep otential wit MZ countri WAS. The mmon curre 5 and 6). A ems to hav xperience w Guinea Biss Asian trade flows l. The mode among the al trade (A) COWAS co al expansio n ECOWA ntry. The re e potential o al trade rep e between t classificatio rade, mis-i country ba 000 times th presented by thin the reg ies indicatin low trade ency of CFA A critical loo ve high trad which have b sau is the o n Journal of F for ECOW el estimates countries. ; that is, (P ountries. If on of trade w AS. The est esult put for of country s orted by ea trading part on of goods nvoicing, t ased on the he current tr y “-“. The r gion. There ng existenc potential b A franc but ok at the tra de potential been record only Portugu Finance & Ac ISSN 19 2012, Vol. www.macrothi WAS count s from the p The ratio P/A) is then f the value with the re timate show rth argumen say A with ach country tners as a r s, re-export transfer pri reported tra trade is clas results pres e is huge p ce of trade between W t WAMZ c ade potentia l with mos ded in the l uese countr ccounting 946-052X 4, No. 2 ink.org/ajfa tries, we previous of trade n used to of P/A spective ws each nt which B is not . This is result of , partner icing & ade with sified as ented in potential e barrier WAEMU countries al within st of the iterature ry in the Table 5 B B BF 0.1 CV 983 CD 1.3 GA 0.2 GH 1.1 GU 1.9 GB 938 LB 0.5 M 0.2 N 0.3 NG 0.8 SG 0.9 SL - TG 0.5 **B-Benin LB-Liberia Source: A Table 6 Source: A 5. Intra-ECO BF C 0.16 - 1 - 3 - 3 0.79 2. 9 - 9. 0 0.35 - 7 - - 8 - 0. 1 - - 5 0.20 - 3 1.67 - 7 16.87 5. 8 1.88 4. - - 4 0.43 - n, BF-Burkina F a, M-Mali, N-Ni Author’s Estim 6. Intra-WAE Author’s Estim OWAS Trad CV CD G 0.93 - 0.38 - 0.20 0 .26 0 .82 0.20 1.41 0 0.22 0 .23 0.20 0 0.21 0 0.46 2 1.83 - .34 1.18 2 .0 0.66 0 0.20 0 1.64 0 Faso, CV-Cape ger, NG-Nigeria mate, 2012 EMU Trade B B BF 0.1 CD 1.3 GB 938 B 0.5 M 0.2 N 0.3 SG 0.9 TG 0.5 mate, 2012 de Potential GA GH 46.82 0.18 .38 - .64 1.87 0.204 .20 .73 0.73 .24 - .22 0.35 0.20 24.44 1.25 9.88 0.62 .635 2.60 .20 0.20 .64 2.18 Verde, CD-Co a, SG-Senegal, SL e Potential BF CD 0.16 0.9 1 0.3 3 0.79 8 - 0.2 1 - 0.2 5 0.20 0.4 3 1.67 1.8 8 1.88 0.6 4 0.43 1.6 327 Estimates GU GB 1.07 - - 9.12 - 0.20 1.22 3.75 2.62 1.89 0.59 - 2.36 0.47 1.14 0.20 0.50 - - - 1.71 - 1.25 0.60 0.83 - 3.15 - ote d’Ivoire, GA L-Sierra Leone, D GB M 93 - 0. 38 9.12 0. 3.75 0. 20 - 21 0.20 - 46 - 83 - 0. 66 0.60 0. 64 - 0. Asian LB M 2.79 0.21 6.25 0.11 727 - 0.71 0.90 0.20 0.63 0.21 47.2 0.32 1.98 - - - - - 0.95 0.48 11.89 1.55 0.37 0.20 - 0.25 0.38 A-Gambia, GH TG-Togo M N S .21 0.08 0 .11 0.65 0 .90 1.36 0 - 0 - 0 0.20 0 .95 0 .37 6.58 .38 0.21 0 n Journal of F N NG 0.08 299 0.65 830 - 3.47 1.36 0.96 - 5.94 0.28 16.86 6.79 0.73 - - - 0.32 0.20 0.21 16.3 1.35 6.58 0.86 704 1.92 0.21 130 H-Ghana, GU-G SG TG 0.12 1.96 0.79 1.14 0.82 0.91 0.21 - 0.21 0.26 0.21 0.20 0.76 0.27 0.73 0.42 Finance & Ac ISSN 19 2012, Vol. www.macrothi SG SL 0.12 - 0.79 - 0.38 - 0.82 1.7 3.05 0.2 6 0.27 0.3 0.35 7.2 0.21 0.2 0.21 0.2 0.21 - 0.76 - 0.79 3.2 4.4 0.20 0.42 - Guinea, GB-Guin ccounting 946-052X 4, No. 2 ink.org/ajfa L TG 1.96 1.14 - 77 0.91 26 0.33 33 1.55 21 0.39 20 - 24 0.26 0.20 0.27 23 0.367 46 0.73 - nea Bissau, Table 7 Source: A 5. Conc In this p panel d techniqu which existenc trade p whether should b zone an effect w to trade The stu promoti be purs with ex Referen Anderse http://dx 7. Intra-WAM Author’s Estim clusion paper, we h data for the ue. The stu mainly exi ce of trade b potential of r currency be noted th nd is coinci which needs e expansion udy recomm ion includin sued. Furthe xhausted trad nces en, P. G. ( x.doi.org/10 MZ trade P GA GH GU LB NG SL mate, 2012 have estimat year 1980 udy finds ev ist between barriers but Guinea Bi union is th at Guinea B identally ha s to be looke in ECOWA mends that ng policies er export di de potential (1993). The 0.1080/0003 Potential GA GH 0.2 0.20 0.73 0.7 0.22 0.3 29.88 0.6 0.20 0.2 ted the intra to 2010 ha vidence of h n WAEMU t low trade p issau with he key to d Bissau is the as high trad ed at. The s AS. integration of tariff ha iversificatio l. e 45-Rule 3684930000 328 H GU L 204 2.62 0 0.59 0 73 0 35 1.14 62 1.71 0 20 0.83 0 a-trade poten as been ana high un-exh U and Non- potential wi the rest of diminished e only Portu de potential study further n of the two armonisation on is require Revisited, 00093 Asian LB NG 0.20 5.94 0.21 16.86 0.32 0.73 0.32 0.48 0.20 1.92 ntial in ECO alyzed usin hausted intr -WAEMU ithin the W f WAEMU intra-trade uguese colo raising the r identified o blocs is v n and cultur ed to expan Applied Ec n Journal of F SL 0.26 0.33 7.21 0.24 3.23 OWAS usin g the Panel a-trade pote Countries g AEMU and U countries potential w onised count issue of la export dive very impor ral especial nd intra-trad conomics, 2 Finance & Ac ISSN 19 2012, Vol. www.macrothi ng gravity m l DOLS est ential in EC given suspi d WAMZ. 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