Intra-ECM Trade Intensity in Africa: Are Currency and Language Determinants?

Abstract

The ultimate goal of trade integration in Africa is the total elimination of tariffs, the free movement of people and goods, the reduction of transaction costs and the convergence of economic rules and policies on trade, while ensuring the cohesion of the stages of regional and continental integration. In this paper, we investigate whether or not there is a need for a more comprehensive approach to trade integration in Africa, and if so, how this can be achieved. In this paper, we investigate whether currency and common language, taken together, are determining factors in trade intensity.  For this purpose, we use the gravity model augmented with variables such as language, currency and common language interaction (mon≠lancom), currency and common border interaction (mon≠frntcom), border and trade agreement interaction (frntcom≠accom), bilateral trade volume by the economic weight of two countries (their GDP or GDP/capita in general) and by the distance between them which can evolve as a function of time Disdier and Head (2008) and Buch et al. After estimating the model with 2129 observations, we find a lack of overall significance in ECOWAS and IGAD, but in the other communities, namely ECCAS, EAC, CENSAD, AMU, SADC and COMESA, the model is globally significant. This means that currency and language remain determinant in the intensification of trade in Africa. As economic policy recommendations, accelerate the process of finalising and putting into circulation the single currency and a uniform continental communication system.

Keywords: Trade intensity; Intra-CER; Determinants

JEL Classification : F02 F15 F19 F42

Paper Type: Empirical Research