Vulnerability of WAMZ member states to external shocks : implications for intra-WAMZ trade

This study examines the multiplicity effects of structural economic vulnerability (SEV), institutions, real exchange rate and complementarity trade structures on intra-WAMZ trade. The modified gravity model based on Poisson pseudomaximum-likelihood (PPML) estimation technique is utilised to achieve the objectives of the study. The estimated results show that there is negative and significant relationship between different measures of SEV and bilateral trade, which suggests that SEV tends to discourage intra-trade in the region. This connotes that those external shocks, emanating from both external and domestic environments will have a negative effect on bilateral trade flows in the zone. This relationship remains consistent despite using different alternative measurements. The results also reveal the extent of influence of other key variables such as institutions, trade complementarity, real exchange rate, and economic size on zonal trade flows. The study recommends that WAMZ Member States should continue to put in place diverse programmes and policies that are geared towards improving resilience of the economies from adverse external shocks and thus boosting intra-WAMZ trade. These should be complemented by measures that will enhance trade complementarity structures, including encouraging zonal value chains through trading in intermediate inputs across countries to enable WAMZ Member States to take advantage of the African Continental Free Trade Area (AfCFTA) initiative.