Commercial opening and synchronization of cycles: case of ECCAS and ECOWAS

Abstract

The objective of this work is to see if trade openness allows for a synchronization of cycles and thus a greater efficiency of fiscal policy and price coordination policy. Furthermore, this work evaluates the relationship between trade openness and cycle synchronization in ECOWAS and ECCAS. The statistical methodologies used are the calculation of absolute deviations from the mean of public expenditure and inflation, the calculation of the degree of trade openness on the one hand, and the calculation of cycle synchronization using the Hodrick Prescott (HP) method on the other. For a good estimation, we used the gravity model on 690 observations (420 for ECOWAS + 270 for ECCAS) using the ordinary least squares method added instrumental variables such as the common language, maritime façade called in the work by coastal country and the single currency. The results obtained show that trade openness favors the synchronization of cycles in ECOWAS and remains unfavorable in ECCAS. On the one hand, there is a good coordination of fiscal policy and price coordination policy in ECCAS (panel B), and an absence of these policies in ECOWAS despite the efforts made.

Keywords: Business cycle synchronization, instrumental variable, fiscal policy

JEL classification: B27 C23 C26 E31