Does Financial Integration Exist in ECOWAS?
Abstract
Free movement of goods, capital, and persons have been the long-term strategic goals of the Economic Community of West Africa States (ECOWAS) since its establishment. Notwithstanding, financial integration has become more important in deepening political integration in the region than ever. Assessing how far the Regional Economic Community (REC) has achieved her objective of free movement of capital among the member states. Therefore, this study investigated the existence of financial integration in ECOWAS by employing savings-investment equality, popularly known as Feldstein-Horioka Criterion; a panel data for all the 15 member states was fitted into the specified model. The study found that there is the existence of financial integration in the REC, and that language inhibits financial integration and that the coefficient of language dummy stands at -4.8 percent. However, it found that language inhibition of the financial integration in the REC will gradually disappear over time, as the interactive coefficient of language and time stands at -0.12 percent. This study concludes that a level of financial integration is in existence in the REC. Therefore, the REC is prepared for monetary unification assuming that there will be more substantial trade among the member states.
Downloads
References
Agenor, P. R. (2003). Benefits and costs of international financial integration. Oxford, United Kingdom: Blackwell Publishing Ltd.
Agudelo, D. & Davidson, L. S. (2006). The gravity of globalization. Research in Global Strategic Management , 12, 79-103.
Agudelo, D., Benitez, G. J. & Davidson, L. S. (2006). A South American perspective: Regional versus global trade patterns. Research in Global Strategic Management , 12, 105-130.
Asian Development Bank. (2013). The road to ASEAN financial integration: A combined study on assessing the financial landscape and formulating milestones for monetary and financial integration in ASEAN. Mandaluyong: Asian Development Bank.
Asteriou, D. & Hall, S. G. (2007). Applied Econometrics: A modern approach (Revised Edition ed.). New York: Palgrave Macmillan.
Baele, L., Ferrando, A., Hordahi, P., Krylova, E. & Monnet, C. (2004). Measuring financial integration in the Euro Area. Occasional Paper Series, 14, 1-98.
Balassa, B. (1961). The theory of Economic Integration: Greenwood Publishing Group.
Brown, V. W. (1982). Economic Community of West African States (ECOWAS). International Science & Technology Institute, Inc., Washington, D. C.
Cheung, Y. W., Chinn, M. D. & Fujii, E. (2007). The economic integration of greater China: Real and financial linkages and the prospects for currency union. Aberdeen: Hong Kong University Press.
ECOWAS. (2012). 2012 Annual Report Integration and Political Stability in West Africa. Abuja: ECOWAS.
ECOWAS. (1976). Treaty of the Economic Community of West African States (ECOWAS). United Nations - Treaty Series , 1010 (1-14843), 17 - 41.
Engle, R. F. & Granger, C. W. (1987). Co-integration and error correction: Representation, estimation, and testing. Econometrica, 55, 251 - 276.
Feldstein, M. & Bacchetta, P. (1991). 'National saving and international investment.' In national saving and economic performance. In B. D. Bernheim, & J. B. Shoven (Ed.), NBER project report (pp. 201 - 226). Chicago: University of Chicago Press.
Feldstein, M. & Horioka, C. (1980). Domestic Saving and International Capital Flows. The Economic Journal, 90(358), 314 - 329.
Fratianni, M. (2006). Borders and Integration. (M. Fratianni, Ed.) Research in Global Strategic Management, 12, 11 -38.
Fratianni, M. & Kang, H. (2006). International terrorism, international trade, and borders. Research in Global Strategic Management, 12, 203-223.
Gidigbi, M. O. (2016). Assessement of the impact of savings and investment on economic growth in some selected African countries. Modibbo Adama University of Technology, Economics Department. Yola: Unpublished.
Guillaume Gaulier, S. J. & Unal-Kesenci, D. (2006). Explaining regionalisation via relative trade intensities. In S. J. Guillaume Gaulier, D. Unal-Kesenci, & P. D. Lombaerde (Ed.), Assessment and measurement of regional integration (pp. 86-106). New York, USA: Routledge.
Kenen, P. B. (1976). Capital mobility and financial integration: A survey. Princeton Studies in International Finance, 39, 1-92.
Khan, F., Muneer, S. & Ahmad, A. M. (2013). Relationship between stock prices and economic variables: Sectoral analysis. Actual Problems of Economics, 5, 544-553
Kleimeier, S. & Sander, H. (2000). Regionalisation versus globalisation in European financial market integration: Evidence from co-integration analyses. Journal of Banking and Finance, 24, 1005 - 1043.
Levin, A., Lin, C. & Chu, C. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108, 1 - 24.
Lombaerde, P. D. & Van Langenhove, L. (2006). Indicators of regional integration: conceptual and methodological aspects. In P. D. Lombaerde, & P. D. Lombaerde (Ed.), Assessment and Measurement of Regional Integration (pp. 9 - 41). Abingdon, United Kingdom: Routledge, Taylor & Francis Group.
Nnabugwu, F. (2016). Ghana bans goods from Nigeria, other countries. Retrieved from Vanguard News: http://www.vanguardngr.com/2016/02/ghana-bans-goods-from-nigeria-other-countries/
Pedroni, P. (1999). Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics, 61, 653 - 670.
Pedroni, P. (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory, 20, 653 - 670.
Robert, R. (2004). The social dimension of regional integration in ECOWAS. International Labour Office, Policy Integration. Geneva: International Labour Organization.
Spengler, J. J. (1949). Theories of Socioeconomic Growth. In U. -N. Bureau, Problems in the Study of Economic Growth (pp. 45 - 114). NBER.
Sy, A. (2014). Four instruments to strengthen financial integration in Sub-Saharan Africa. Working Paper in Development Policies, 108, 1-18.
Todaro, M. P. & Smith, S. C. (2011). Economic Development. Harlow-Essex, England: Pearson Education Limited.
Copyright (c) 2017 Matthew Oladapo Gidigbi, Benedict Akanegbu
This work is licensed under a Creative Commons Attribution 4.0 International License.
Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of a revised paper, the editorial team edits and formats manuscripts to bring uniformity and standardization in published material.
This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.
