EFFECT OF REGIONAL FINANCIAL INTEGRATION AND GOVERNANCE QUALITY ON ECONOMIC GROWTH IN ECOWAS (2001-2016)

Abstract

This study estimates and analyzes the impact of regional financial integration and governance quality on economic growth in West Africa for the period 2001 to 2016. In order to capture regional financial integration, composite index of financial integration and macroeconomic policies, called African Regional Integration Index (ARII) was employed. Governance quality was captured by building an index from components measuring various political and economic dimensions facing firms in a country. The theoretical foundation for this study is based on the Neoclassical-Solow growth model, while the model was estimated using the dynamic panel approach with system generalized methods of moments (SGMM). Estimated result shows that financial integration and governance quality do not support economic growth in ECOWAS, as negative relationship was found. However, the interactive effects of regional financial integration and governance quality shows a positive but insignificant effect on economic growth. The study concluded that ECOWAS commission with full support of all member countries should provide all necessary financial infrastructures that will provide essential support to good governance in the financial sector of the region.