Intraregional trade, multiregional trade and economic growth: Evidence from Africa’s market integration

Policymakers in Africa have initiated several regional trading schemes aimed at increasing intra-African trade, believing that it will help achieve rapid economic growth. This paper uses panel data of 42 African countries to investigate the impact of intra-African merchandise trade, extra-African merchandise trade, and multiregional total trade openness on economic growth. We find positive and significant long-run impact of intra-African merchandise trade, extra-African merchandise trade, and multiregional total trade openness on the level of real GDP per capita. However, at the regional level, the long-run impact of intra-African merchandise trade openness on the level of real GDP per capita is only significant in the relatively more integrated regional markets. We do not find the direct impact of trade openness on growth to be statistically significant in the short run, though mostly positive. Besides cross border trade, the paper illustrates the positive and significant role played by physical and human capital accumulation in the economic growth and development process of Africa. The estimated results are consistent across the different estimation approaches employed.