Bilateral Trade Versus Institutional Quality: Ecowas States Analysis

Abstract

This study investigates the impact of institutional quality on bilateral trade between ECOWAS countries and their trading partners. Using a gravity model of trade within an infinitely dynamic trade framework, we analyze the enforceability of agreements among the 55 ECOWAS states and their trading counterparts. The results reveal that trade freedom positively affects exporters and importers, while institutional quality in financial freedom has a detrimental impact on ECOWAS bilateral trade. We emphasize the importance of international development policies aimed at removing such obstacles to achieve optimal ECOWAS bilateral trade, which represents the first-best solution for maximizing ECOWAS states' potential.