Economic Uncertainty And Intra-Regional Trade In West Africa

International Journal of Economics and Management Studies

© 2021 by SSRG - IJEMS Journal

Volume 8 Issue 10

Year of Publication : 2021

Authors : Dr. Kadagali Komlan

10.14445/23939125/IJEMS-V8I10P117

How to Cite?

Dr. Kadagali Komlan, "Economic Uncertainty And Intra-Regional Trade In West Africa," SSRG International Journal of Economics and Management Studies, vol. 8,  no. 10, pp. 133-138, 2021. Crossref, https://doi.org/10.14445/23939125/IJEMS-V8I10P117

Abstract:

This paper investigates the effects of economic uncertainty (UPE) on intra-regional trade flows in ECOWAS countries. Using the Baker, Bloom, and Davis (2016) economic uncertainty index (UPE) in a gravity model taking into account the latest theoretical advances (Head and Mayer, 2014) and applying the Poisson pseudo maximum likelihood (PPML) estimator, we show over the period 1995-2015, that the effect of economic uncertainty on bilateral trade of these countries is negative and significative. These results have implications for the formation of the future common currency, and the current efforts of policymakers should take into account the heterogeneity of the different countries and their economic environment.

Keywords:

Economic activity, Uncertainty, Economic growth.

References:

[1] Armelius, H., Belfrage, C.-J., & Stenbacka, H., The mystery of the missing world trade growth after the global financial crisis. Sveriges Riksbank Economic Review, 3 (2014) 7–22.
[2] Baker, S. R., Bloom, N., & Davis, S. J. Has economic policy uncertainty hampered the recovery? Government policies and the delayed economic recovery, 70 (2012).
[3] Baker, S. R., Bloom, N., & Davis, S. J. Measuring economic policy uncertainty. The quarterly journal of economics, 131(4) (2016) 1593–1636.
[4] Beckmann, J., & Czudaj, R., Exchange rate expectations since the financial crisis : Performance evaluation and the role of monetary policy and safe haven. Journal of International Money and Finance, 74 (2017) 283–300.
[5] Bloom, N., The impact of uncertainty shocks. Econometrica, 77(3) (2009) 623–685.
[6] Constantinescu, C., Mattoo, A., & Ruta, M. Trade developments in 2016 : Policy uncertainty weighs on world trade. World Bank, (2017).
[7] Dixit, A., Hysteresis, import penetration, and exchange rate pass-through. The Quarterly Journal of Economics, 104(2) (1989) 205–228.
[8] Dixit, A. K., Dixit, R. K., & Pindyck, R. S., Investment under uncertainty. Princeton university press, (1994).
[9] Engel, C., Mark, N. C., West, K. D., Rogoff, K., & Rossi, B., Exchange rate models are not as bad as you think [with comments and discussion]. NBER macroeconomics annual, 22 (2007) 381–473.
[10] Frankel, J. A., Stein, E., & Wei, S.-J., Regional trading blocs in the world economic system. Peterson Institute, (1997).
[11] Han, L., Qi, M., & Yin, L., Macroeconomic policy uncertainty
shocks on the Chinese economy : A GVAR analysis. Applied Economics, 48(51) (2016) 4907–4921.
[12] Handley, K., & Limao, N., Trade and investment under policy uncertainty : Theory and firm evidence. American Economic Journal: Economic Policy, 7(4) (2015) 189–222.
[13] Head, K., & Mayer, T., Gravity equations : Workhorse, toolkit, and cookbook. In Handbook of international economics, 4 (2014) 131–195 Elsevier.
[14] Hlatshwayo, S., & Saxegaard, M. M., The consequences of policy uncertainty : Disconnects and dilutions in the South African real effective exchange rate-export relationship. International Monetary Fund, (2016).
[15] Jones, P. M., & Olson, E., The time-varying correlation between uncertainty, output, and inflation : Evidence from a DCC-GARCH model. Economics Letters, 118(1) (2013) 33–37.
[16] Kang, W., Lee, K., & Ratti, R. A., Economic policy uncertainty and firm-level investment. Journal of Macroeconomics, 39 (2014) 42–53.
[17] Kepaptsoglou, K., Karlaftis, M. G., & Tsamboulas, D., The gravity model specification for modeling international trade flows and free trade agreement effects : A 10-year review of empirical studies. The open economics journal, 3(1) (2010)
[18] Kido, Y., On the link between the US economic policy uncertainty and exchange rates. Economics Letters, 144 (2016) 49–52.
[19] Kose, M. A., & Terrones, M., How does uncertainty affect economic performance? Box, 1 (2012) 49–53.
[20] Krol, R., Economic policy uncertainty and exchange rate volatility. International Finance, 17(2) (2014) 241–256.
[21] Linder, S. B., An essay on trade and transformation. Almqvist & Wiksell Stockholm, (1961).
[22] Novy, D., & Taylor, A. M., Trade and uncertainty. Review of Economics and Statistics, (2014) 1–50.
[23] Romer, P. M., Capital, labor, and productivity. Brookings papers on economic activity. Microeconomics, (1990) 337–367.
[24] Rose, A. K., Do currency unions increase trade? A gravity approach. FRBSF Economic Letter, (2000).
[25] Silva, J. S., & Tenreyro, S., Further simulation evidence on the performance of the Poisson pseudo-maximum likelihood estimator. Economics Letters, 112(2) (2011) 220–222.
[26] Sourdin, P., & Pomfret, R. W., Trade Facilitation : Defining, measuring, explaining and reducing the cost of international trade. Edward Elgar Publishing, (2012).