Trade-Led Growth Hypothesis or Growth-Led Trade Hypothesis: An Empirical Analysis of the West African Monetary Zone (WAMZ) Countries

Abstract

The paper investigated the trade-led growth hypothesis or growth-led trade hypothesis in WAMZ countries (Nigeria, Gambia, Ghana, Guinea, Liberia and Sierra Leone). Individual country and cross-sectional analysis were done and for the individual country analysis, FMOLS, DOLS, and CCR were considered with Granger causality. The estimated results confirmed the import-led growth hypothesis for Nigeria, Guinea, and Liberia, a trade-led growth hypothesis for the Gambia and Sierra Loan and export-led growth was supported for Ghana. For cross country analysis, FMOLS, DOLS and Granger causality tests were used and trade-led growth hypothesis (both export-led and import-led growth) was valid in WAMZ countries but imports were the most significant variable that influences economic growth than exports. The paper recommended that export promotion policy in WAMZ should focus on manufacturing exports and import substitution policy in WAMZ should focus on importing raw-material and technology for more products in order to accelerate economic growth in WAMZ.