The impact of the terms of trade on economic growth in ECOWAS countries
DOI:
https://doi.org/10.18559/rielf.2025.2.2864Keywords:
terms of trade, economic performance, ARDL, ECOWASAbstract
Purpose: In an era of globalisation and trade liberalisation, the terms of trade have a great deal of attention in recent decades. The diversity of products traded, both in terms of their characteristics and their prices, leads to variations in the terms of trade, which could have an impact on growth. The aim of this paper is therefore to analyse empirically the trend and variability of the terms of trade on the economic performance of ECOWAS countries.
Design/methodology/approach: The methodology uses a growth model that has been estimated for ECOWAS countries over the period 2000 to 2018 using panel data.
Findings: The results of the estimations conducted using ARDL models show that the terms of trade trend have a positive impact on growth, while the variability of the terms of trade has a negative impact on growth in ECOWAS countries.
Originality/value: Through this study, public policies should respond to both the short‑term and long-term challenges of terms of trade movements on their country’s economic performance.
JEL Classification
General (E30)
Economic Growth of Open Economies (F43)
Macroeconomic Analyses of Economic Development (O11)
Downloads
References
Abessolo, Y. (1998). Les déterminants de la croissance économique en Afrique subsaharienne: Une analyse empirique. Documents de Travail, 29. https://ideas.repec.org/p/mon/ceddtr/29.html
View in Google Scholar
Acemoglu, D., Johnson, S., Robinson, J., & Thaicharoen, Y. (2003). Institutional causes, macroeconomic symptoms: Volatility, crises and growth. Journal of Monetary Economics, 50(1), 49–123.
View in Google Scholar
Aghion, P., Bacchetta, P., Rancière, R., & Rogoff, K. (2009). Exchange rate volatility and productivity growth: The role of financial development. Journal of Monetary Economics, 6(4), 494–513.
View in Google Scholar
Alimi, N., & Aflouk, N. (2017). Terms-of-trade shocks and macroeconomic volatility in developing countries: Panel smooth transition regression models. The Journal of International Trade & Economic Development, 26(5), 534–551. https://doi.org/10.1080/09638199.2016.1278029
View in Google Scholar
Andrews, D., & Rees, D. (2009). Macroeconomic volatility and terms of trade shocks. RBA Research Discussion Paper, 5. https://EconPapers.repec.org/RePEc:rba:rbardp:rdp2009-05
View in Google Scholar
Arreaza, A., & Toledo, M. E. (2017). Termes de l’échange et dynamique macroéconomique en Amérique latine. Revue d’Économie Financière, 4(124), 45–59.
View in Google Scholar
Awel, A. M., & Desalegn, G. (2018). Effects of terms of trade and its volatility on economic growth in sub-Saharan Africa. Ethiopian Journal of Economics, 27(1), 1–28. https://scispace.com/pdf/effects-of-terms-of-trade-and-its-volatility-on-economic-164qcv1y0a.pdf
View in Google Scholar
Banque mondiale. (2018). Investir dans les opportunités. Rapport annuel. https://documents1.worldbank.org/curated/en/375261538160229155/pdf/The-World-Bank-Annual-Report-2018.pdf
View in Google Scholar
Banque mondiale. (2019). Mettre fin à la pauvreté, investir dans les opportunités. Rapport annuel. Groupe de la Banque mondiale. https://documents1.worldbank.org/curated/en/577041570463669942/pdf/The-World-Bank-Annual-Report-2019-Ending-Poverty-Investing-in-Opportunity.pdf
View in Google Scholar
Banque mondiale. (2022). Rapport annuel de la Banque mondiale: Aider les pays à s’adapter dans un Monde en Mutation. Groupe de la Banque mondiale
View in Google Scholar
Ben-Zeev, N., Pappa, E., & Vicondoa, A. (2016). Emerging economies business cycles: The role of the terms of trade revisited. Discussion Paper, 16-10. http://in.bgu.ac.il/en/humsos/Econ/Working/1610.pdf
View in Google Scholar
Berthelier, P. & Lipchitz, A. (2005). Quel rôle joue l’agriculture dans la croissance et le développement ? Revue Tiers Monde, 3(183), 603–624.
View in Google Scholar
Bloomfield, A. (1994). Essays in the history of international trade theory. Edward Elgar.
View in Google Scholar
Broda, C. (2004). Terms of trade and exchange rate regimes in developing countries. Journal of International Economics, 63(1), 31–58. https://doi.org/10.1016/S0022-1996(03)00043-6
View in Google Scholar
Brueckner, M., & Carneiro, F. (2016). Terms of trade volatility, government spending cyclicality, and economic growth. CAMA Working Papers, 2016-36. The Australian National University.
View in Google Scholar
Cavalcanti, T., Mohaddes, K., & Raissi, M. (2012). Commodity price volatility and the sources of growth. IMF Working Paper, 12/12. https://www.imf.org/external/pubs/ft/wp/2012/wp1212.pdf
View in Google Scholar
Chilosi, D., Federico, G., & Tena-Junguito, A. (2023). Terms of trade during the first globalization: New evidence, new results. European Review of Economic History, 27(1), 91–122.
View in Google Scholar
Chudik, A., & Pesaran, M. H. (2015). Common correlated effects estimation of heterogeneous dynamic panel data models with weakly exogenous regressors. Journal of Econometrics, 188(2), 393–420. https://doi.org/10.1016/j.jeconom.2015.03.007
View in Google Scholar
Collier, P., & Goderis, B. (2012). Commodity prices and growth: An empirical investigation. European Economic Review, 56(6), 1241–1260. https://doi.org/10.1016/j.euroecorev.2012.04.002
View in Google Scholar
Dedewanou, F. A. (2015). Analyse comparative des déterminants de la croissance des pays de l’UEMOA et des pays à forte croissance. Revue d ’ Analyse des Politiques Économiques et Financières, 1(1), 41–68.
View in Google Scholar
Ekodo, R., & Ngomsi, A. (2017). Ouverture commerciale et croissance économique en zone CEMAC. Journal of Economics and Development Studies, 5(3), 58–67. https://doi.org/10.15640/jeds.v5n3a7
View in Google Scholar
FMI (Fonds Monétaire International). (2017). Pour une croissance inclusive. Rapport annuel 2017 du FMI. https://www.imf.org/external/pubs/ft/ar/2017/eng/pdfs/AR17-FRE.pdf
View in Google Scholar
García-Herrero, A., & Villarubio, J. (2005). The Laffer curve of macroeconomic volatility and growth: Can it be explained by the different nature of crises? Money Affairs, 20(1), 43–60.
View in Google Scholar
Grimes, A (2006). A smooth ride: Terms of trade, volatility and GDP growth. Journal of Asian Economics, 17(4), pp 583–600. https://doi.org/10.1016/j.asieco.2006.06.005
View in Google Scholar
Harberger, A. C. (1950). Currency depreciation, income, and the balance of trade. Journal of Political Economy, 58(1), 47–60. https://doi.org/10.1086/256897
View in Google Scholar
Jacks, O., & O ’ Rourke, K., & Williamson, J. G. (2011). Commodity price volatility and world market integration since 1700. Review of Economics and Statistics, 93(3), 800–813.
View in Google Scholar
Jawaid, S. T., & Waheed, A. (2011). Effects of terms of trade and its volatility on economic growth: A cross country empirical investigation. Transition Studies Review, 18(2), 217–229. https://doi.org/10.1007/s11300-011-0201-7
View in Google Scholar
Jebran, K., Iqbal, A., Rao, Z. R., & Ali, A. (2018). Effects of terms of trade on economic growth of Pakistan. Foreign Trade Review, 53(1), 1–11. https://doi.org/10.1177/0015732516663315
View in Google Scholar
Komanda, O., & Raymond, E. (2023). L’effet de l’instabilité des termes de l’échange sur la croissance économique dans les pays de la CEMAC: Le rôle de la qualité de la régulation. Revue Marocaine de Commerce et de Gestion, 12, 139–159.
View in Google Scholar
Kose, M. (2002). Explaining business cycles in small open economies: How much do world prices matter? Journal of International Economics, 56(2), 299–327.
View in Google Scholar
Laursen, S., & Metzler, L. A. (1950). Flexible exchange rates and the theory of employment. The Review of Economics and Statistics, 32(4), 281–299. https://doi.org/10.2307/1925577
View in Google Scholar
Lindjouom Tanka, K. L., Eze Eze, D., & Mveimbi Gneba, P. (2023). Chocs exogènes et croissance économique dans la CEMAC: Application du modèle VAR. Revue AME, 5(4), 402–419. https://doi.org/10.48374/IMIST.PRSM/ame-v5i4.44250
View in Google Scholar
Lutz, M., & Singer, H. (1994). Trend and volatility in the terms of trade: Consequences for growth. In W. Morgan & D. Sapsford (Eds.), The economics of primary commodities: Models, analysis and policy (pp. 91–121). Edward Elgar.
View in Google Scholar
Mendoza, E. (1997). Terms-of-trade uncertainty and economic growth. Journal of Development Economics, 54(2), 323–356.
View in Google Scholar
Nguyen, H. T. (2021). The impact of investments on economic growth: Evidence from Vietnam. The Journal of Asian Finance, Economics and Business, 8(8), 345–353. https://doi.org/10.13106/jafeb.2021.vol8.no8.0345
View in Google Scholar
PNUD (Programme des Nations Unies pour le Développement). (2017). Perspectives économiques en Afrique. https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Perspectives_economiques_en_Afrique_2017.pdf
View in Google Scholar
Samimi, A., Sadeghi, S., & Sadeghi, S. (2011). The impact of the terms of trade volatility on economic growth: Evidence from oil exporting countries. International Journal of Economics and Management Engineering, 1(1), 50–53.
View in Google Scholar
Silberberger, M., & Stender, F. (2018). False friends? Empirical evidence on trade policy substitution in regional trade agreements. The World Economy, 41(8), 2175–2199. https://doi.org/10.1111/twec.12605
View in Google Scholar
Somé, I., & Maiga, E. (2021). Effets des prix relatifs des échanges sur la croissance économique en Afrique subsaharienne. Region et Development, 54, 161–175.
View in Google Scholar
Somé, G., & Zidouemba, P. R. (2024). The role of the African continental free trade area in transforming the economic landscape of the C-4 countries. Revue d’Économie du Développement, 32(3–4), 107–113. https://shs.cairn.info/journal-revue-d-economie-du-developpement-2024-3-page-107?lang=en
View in Google Scholar
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Kossi Ayenagbo
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
