International Trade, Economic Growth and Governance: Evidence from ECOWAS Member Countries

Abstract

This study examines the relative effects of trade in goods and trade in services on economic growth. Data were obtained from the World Development Indicators and the Worldwide Governance Indicators for thirteen (13) ECOWAS member countries covering the period 2000 to 2017. We also created an index of worldwide governance indicators using the principal component analysis and then used that index as a key explanatory and interaction variable. Applying the Fully Modified Ordinary Least Squares (FMOLS) and the Dynamic Ordinary Least Squares (DOLS), we found that both Goods and Services Trade positively influence economic growth, but Goods Trade had a higher impact than Services Trade. This implies that prioritizing Goods Trade would improve economic growth in ECOWAS if the Goods Trade is associated with value addition or diversification. Consistent with the findings, efforts to diversify ECOWAS trade should be promoted.