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Abstract:
This study assesses the effect of monetary integration on intra-country trade in the ECOWAS zone (Economic Community of West African States), conditional on institutional governance in these countries using times series data from 1990 to 2018. Employing an augmented gravity model, the results indicate that monetary integration has a positive effect of about 274% on trade in ECOWAS countries. Better, this effect is multiplied by three when the use of a common currency is associated with institutional governance in these countries. These results indicate that institutional governance has an accelerating effect on the intra-regional trade when the member countries adopt a common currency. In terms of economic policy implications, this study suggests that ECOWAS countries need to ensure that the quality of institutional governance is improved in order to reap the full commercial benefits of monetary integration. Likewise, the inadequacy and poor condition of transport and communication infrastructure must be an integral part of community governance in order to limit the negative effects of geographic distance between countries.
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