Logistics and trade flows in selected ECOWAS Countries: An empirical verification

TL;DR

This study empirically examines the influence of logistics performance and macroeconomic variables on trade flows in selected ECOWAS countries, finding logistics has no significant impact on trade among these nations.

Contribution

It provides an empirical verification of logistics' role in trade flows within ECOWAS, highlighting the limited impact of logistics components and suggesting policy improvements.

Findings

Logistics performance has no significant impact on trade flows.

GDP positively influences export trade.

Relative import price inversely affects imports.

Abstract

This study investigates the role of logistics and its six components on trade flows in selected Economic Community of West Africa States (ECOWAS) countries. The impact of other macro-economic variables on trade flows was also investigated. Ten countries were selected in eight years period. We decomposed trade flows into import and export trade. The World Bank Logistics performance index was used as a measure of logistics performance. The LPI has six components, and the impact of these components on trade flows were also examined. The fixed-effect model was used to explain the cross-country result that was obtained. The results showed that logistics has no significant impact on both Import and export, thus logistics play no role on trade flows among the selected ECOWAS countries. The components of logistics except Timeliness of shipments in reaching the final destination ( CRC ),have no impact on trade flows. Income was found to be positively related to imports. Exchange rate, consumption and money supply, reserve and tariff have no significant impact on imports. Relative import price has an inverse and significant relationship with imports. GDP has a positive and significant impact on export trade. The study also found FDI, savings, exchange rate and labour to have insignificant impact on exports. Finally, we found that logistics is not a driver of trade among the selected ECOWAS countries. The study recommended the introduction of the single window system and improvement in border management in order to reduce the cost associated with Logistics and thereby enhance trade.