Is Regional Trade Integration a Growth and Convergence Engine in Africa?

This paper examines the contribution of regional trade integration to economic growth and income convergence and its Regional Economic Communities

From:: Foreign, Commonwealth & Development Office
Published: 29 January 2021

Document Type:: Working Paper
Theme:: Economic Growth
Authors:: Gammadigbe, V

Abstract

The main objective of Regional Trade Agreements (RTAs) is to stimulate economic growth in participating countries through increased trade, economies of scale, knowledge and technology transfer. Using a panel data over the period 1979 to 2018, this paper examines the contribution of regional trade integration (RTI) to economic growth and income convergence in Africa and its major Regional Economic Communities (RECs). The results of the instrumental variable and panel fixed-effects estimation show that RTI promotes economic growth in Africa. However, it fosters income divergence, reflecting the distribution of the gains from regional integration in favor of the more developed economies of the continent. The results of this study show the importance to support the African Continental Free Trade Area (AfCFTA) project with policies aimed at reducing non-tariff barriers to trade and improving infrastructure in order to maximize the effects on growth in all participating countries.

This work is part of the ‘Macroeconomics in Low-income countries’ programme

Citation

Vigninou Gammadigbe (2021) Is Regional Trade Integration a Growth and Convergence Engine in Africa? IMF Working Paper No. 2021/019