Regional Integration and Trade in Africa: Augmented Gravity Model Approach

Despite the existence of many regional economic communities (RECs) in Africa, intra-regional trade remains staggeringly low compared to other trading blocs in Europe, Asia and Latin America. Hence this study tries to uncover the main factors behind the low level of intra-regional trade and the role of RECs in promoting intra-regional trade by taking four RECs in Africa (COMESA, ECOWAS, IGAD and SADC) and applying the intuitive and theoretical gravity model of Anderson-van Wincoop in panel data framework.

The traditional gravity model variables (GDP, population, distance, border, language, and colonial links) and bilateral real exchange rate, difference in preference among trading partners are found to be important factors for bilateral trade flows. But the impact of the RECs on bilateral trade is found to be mixed; SADC and ECOWAS have led to expansion of intra trade among members; COMESA has implausibly negative coefficient suggesting that it has not expanded trade among the member states whereas IGAD has an insignificant positive coefficient implying that it has not contributed to the expansion of intra-regional trade.

By: Edris H. Seid (MSc)