Impact of Institutional Quality on Intra Regional Trade Flows in Ecowas Countries

This study examined the impact of institutional quality on intra-regional trade in ECOWAS. The main objective of this research is to critically examine the effect of institutional quality on trade in ECOWAS from 2010 to 2023 using the gravity model of trade. Panel Unit Root tests were employed to test for stationarity of the series. Poisson Pseudo Maximum Likelihood Fixed Effect (PPML), was employed to test further for a long-run relationship. The results reveal that the institutional quality index at the aggregated level has an insignificant and positive impact on intra-regional trade in ECOWAS. The analysis of the disaggregated indices shows positive and significant effects of all three (voice and accountability, regulatory quality, and rule of law) out of six indices on intra-regional trade, while political stability, government effectiveness, and control of corruption have a negative but significant impact on trade. Furthermore, we find that gross domestic product and gross domestic product per capita are positively correlated with trade but are insignificant. The results, however, revealed that population growth has a negative but significant effect on trade in ECOWAS. The traditional gravity model variables (GDP, population, distance, landlocked, and official common language) are found to be important factors for bilateral trade flows. The study recommends that policymakers in ECOWAS should improve their institutional frameworks to combat corruption, political instability, and enhance government effectiveness through measures such as relaxed licensing requirements, reduced import taxes, and other bureaucratic bottlenecks