Regional integration readiness of The Gambia: Empirical assessments of the optimality of the Sene-Gambia as a currency area and the trade facilitation effects of the Sene-Gambia Confederation on the Gambian economy

This thesis is an empirical assessment of the readiness of The Gambia for regional integration and is presented in two studies. The first is on the optimality of the Sene-Gambia sub-region as a currency area and the second is on trade facilitation effects of the Sene-Gambia Confederation on The Gambian economy. The first study uses three methods to determine the optimality of the Sene-Gambia as a currency area. The first method is a reduced VAR to examine the response of the Senegalese and The Gambian economies to external shocks emanating from France, the United Kingdom (UK) and United States of America (USA). The second method is a co-integration analysis on Generalized Purchasing Power Parity (GPPP) to determine the existence of a co-integrating relationship between the exchange rates of the Gambian dalasi and Senegalese CFA franc and their consumer price indices. The third method assesses the similarity between the two economies as countries wishing to form an optimal currency area should not be diametrically different in their economic structure or else the relationship would not be mutually beneficial and the resulting union may not be stable. The results support the optimality of Sene-Gambia as a currency area.;Given this optimality, the second study uses an error-corrected gravity model to determine the trade facilitation effects of the Sene-Gambia Confederation on The Gambian economy. It also looks at the significance of financial deepening, a proxy for supply-side constraints, to The Gambian economy. Credit to the private sector measures the level of financial sector deepening in The Gambia. The study finds that the Sene-Gambia Confederation had positive trade facilitation effects for The Gambia and that financial deepening is statistically a significant policy instrument for trade in The Gambia.