Economic growth effects of de facto and de jure trade globalization in ECOWAS

Abstract

This paper examines the dynamics of trade globalization by analysing and comparing the economic growth effect of overall trade globalization with the growth effects of de facto and de jure trade globalization in the economic community of west African states (ECOWAS). Using fixed effects and random effects models, we separate the de facto measure of trade globalization from the de jure measure to prove that de facto trade globalization significantly and positively contributes to economic growth in ECOWAS, whereas de jure trade globalization does not. We also use pooled mean group estimates to prove that the growth effect of de facto trade globalization is significant only in the short run. By implication, relying only on the results of overall trade globalization can be misleading for policymakers, considering that the de facto and de jure measures of trade globalization yield different growth results. The findings of this study can aid policymakers within the region in identifying proper measures and tailoring trade policies to gain reasonable competitive advantage among other economic communities.