Unlocking Trade-Led Growth in West Africa: The Moderating Role of Institutional Quality in a Dynamic Panel Analysis
Abstract
This study examines the conditional effect of trade liberalization on economic growth in West Africa, with a particular focus on the moderating influence of institutional quality. A panel dataset covering 16 West African countries over the period 2017–2022 is employed to estimate a dynamic growth model using the System Generalized Method of Moments (System-GMM), which effectively addresses endogeneity and growth persistence. Robustness checks are conducted using Pooled Ordinary Least Squares (POLS) and Fixed Effects (FE) estimators. The results reveal three key findings. First, trade liberalization has a positive and statistically significant effect on economic growth in the region. Second, although institutional quality exhibits a negative direct effect, likely due to short-run adjustment and compliance costs, the interaction between institutional quality and trade liberalization is positive and strongly significant, demonstrating that governance effectiveness is critical for harnessing the growth benefits of openness. Third, the negative coefficient estimates for financial development and industrialization indicate structural inefficiencies, including credit misallocation and a continued dependence on low-value, resource-based production. Overall, the findings suggest that while West Africa possesses substantial potential for trade-driven development, meaningful gains remain constrained by weak institutional capacity and limited structural transformation. The study recommends targeted governance reforms, improved regulatory enforcement, strategic reallocation of financial resources toward high-value export sectors, and accelerated industrial diversification to ensure that trade liberalization translates into sustained, inclusive economic growth.
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Copyright (c) 2025 Anthony Orji, Ebuka Michael Muorah, Onyinye Imelda Anthony-Orji, Jonathan Emenike Ogbuabor, Oluchi Okoro, Chukwuebuka Jude Chiobi
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