Exploring Trade and Financial Integration on Economic Growth in ECOWAS Countries

This study explored the impact of trade and financial integration on economic growth in the Economic Communities of West African States (ECOWAS) countries from 2001 to 2021. The research focused on analyzing the trade integration index, comprising export concentration and import concentration indexes, as well as the financial integration index, to understand their influence on economic growth. The findings reveal a positive correlation between the financial integration index and output growth in the static model, indicating the importance of financial sector reliability for economic development. However, the long-term relationships between trade integration indexes and economic growth are found to be statistically insignificant, suggesting that trade integration may have short-term effects on policy frameworks and implementations. The study highlights the need for ECOWAS countries to prioritize financial liberalization policies and establish Financial Service Authorities (FSAs) to enhance the financial sector's stability and consumer confidence. Regular trade liberalization and diversification away from primary product exports are recommended to promote sustainable economic growth. Policymakers are urged to consider inter-policy tactics to address heterogeneity, foster institutional transformations, and combat institutional corruption for building sound and competitive institutions within the region. Overall, the study cautions against overestimating the long-term impact of trade and financial integration on economic growth in ECOWAS countries, emphasizing the significance of short-term policy measures to harness their potential benefits for the region's economic development.