"Export, Export Diversification And Economic Growth In West African Countries:Evidence From Panel Data Analysis"

As definition export diversification is the spread of a country’s existing export basket or export destination as well. It is identified in the literature as growth-inducing. However, the assessment of the effect of export diversification on economic growth has not received much attention in West African countries, integrated in Economic Community of West African States (ECOWAS), unlike most of research found in the Latin American and Asia’s world market success which is accompanied by increasing diversification and technological sophistication of exports. Export diversification results of Asia and Latin America continents coupled with the existence of just a few studies about export diversification on SSA economic growth are the motivations for this study. Thus this work examine the relationship between export diversification and economic growth using panel data of fifteen West African countries which is consisted of Benin, Burkina Faso, Cape Verde, Cote D’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra-Leone and Togo for the period 1995-2012.Moreover, we also evidence Export-Led Growth (ELG) hypothesis which subject remain inconclusive.The study has adopted the Panel Least square estimation technique, involving co-integration technique and error correction model to estimate the model. The second objective which is ELG hypothesis test used Granger causality technique developed by Granger (1969) and the modified version of the Wald-causality (MWALD) test developed by Toda & Yamamoto (1995) and Dolado & Lutkepohl (1996) adapted to panel contest similar to Holtz-Eakin et al (1998).Thus this technique tests the existence of a causal relationship between exports and output growth. In relation to most previous empirical studies, this study accounts for time series variations in the data, captures the unobserved country-specific time-invariant effects in the estimation model. The estimation results attest to a positive effect of export diversification on economic growth in the long run in West Africa. Evidence from the regression also does support a hump-shaped relationship between export diversification and economic growth in West African countries and the critical level of CEDI*=0.77, is that level of export diversification at which turnaround in GDP occurs.The presence of evidence of non-linearity relationship between export diversification and economic growth in West Africa means that countries in ECOWAS should intensify export diversification in the early stage of the country’s development at critical level of CEDI*=0.77 and then turns to specialization in order to maintain higher income, when income start to fall with diversification policy.The study also shows that a change of manufacture share on total export affect positively the economic growth.The Fixed Effect analysis showed the period magnitude of the regressand(Real gross domestic products) when all explanatory variables is held constant, and the result of the model shows a negative declining of real gross domestic from 1995 to2003 and become positive from 2004 until 2012. Whereas the country-specific fixed effects revealed the individuals countries position as it relates to the dependent variable (real GDP) and which is not captured by the independent variables in the model, and therefore real gross domestic product in the West Africa is driven by some other variablesUsing annual data from 1995 to 2012 our three causality models test which first model began with a simple bi-variable framework, the second model with the inclusion of real imports as endogenous variable and finally model third was estimated in the form of an augmented production function have revealed that the existence of a unidirectional relationship causality between Economic growth and export. However the test fails to prove the existence causality between export and Economic growth. This result seems to indicate that trade (export) alone fails to boost economic growth. Furthermore it shows that in the absence of complementary development policies, exports alone can not stimulate economic growth and raise people living standard in West Africa.