Exchange Rate, Trade Facilitation and International Flows in West African Monetary Zone (1992-2021)

Abstract:

This study examined the relationships that exist between exchange rate, trade facilitation and international flows on economic growth in West African monetary zone (1992-2021).The study used annual data covering the periods 1992 to 2021 and the autoregressive distributed lag model (ARDLM) was employed. Preliminary tests like the unit root test, co-integration test and vector error correction model (VECM) were carried out during the study. Some of the explanatory variables and the explained variable were proxied, logged and differenced as the case may be so as to achieve the desired objectives without compromise. The study observed that the exchange rate has a negative influence on economic growth in the West African monetary zone, and trade facilitation and international flows have a positive influence on economic growth. The study, therefore, recommends that 1) diversification of the economy from import to the export-based economy is fundamental for economic growth and hence development. This can be achieved through efficient and effective regulation of foreign exchange and political stability, which are very volatile macroeconomic variables.(ii) A common currency basket in the West African monetary zone be established, as this will reduce the adverse effect of exchange rate volatility on trading partners across West Africa.