Regional Integration Models and Africa's Growth in the 21st Century: A Fitness Evaluation
African Development Review
The Research Department, Central Bank of Nigeria, Nigeria
The study explores Africa's regional integration models with a view to determining their suitability or otherwise for rapid economic growth. Using annual data spanning 1980-2012, the study employs the Johansen (1998) and the Johansen and Juselius (1990) method of cointegration and Vector Error Correction Mechanism (VECM) to test for the presence of long-run equilibrium relationships among the variables and estimate their static and dynamic coefficients. The study found a significant positive role for infrastructure financing, and human and physical capital accumulation both of which significantly influenced Africa's economic growth. Intra-African trade, though positive and significant, was found to be less effective in inspiring growth compared to the above growth fundamentals. Trade openness and government spending were the only variables discovered to significantly influence Africa's economic growth in both the short and long run. The study concludes that the traditional approach to regional integration may not provide the best alternative for Africa's economic growth. It, thus, recommends the adoption of a mixed policy approach to regional economic integration to foster Africa's economic growth in the 21st century. The contribution of the study lies in its ability to subject Africa's models of regional integration to practical examination using modern approaches. © 2014 African Development Bank.
cointegration analysis; economic growth; economic integration; policy approach; regional trade; twenty first century