Determinants of Trade Balance in West African Economic and Monetary Union (WAEMU): Evidence from heterogeneous panel analysis

This study investigates the determinants of trade balance in West African and Monetary Union (WAEMU) over period 1975–2017. We employ Mean Group (MG) estimator along with grouped mean version Dynamic OLS (DOLS) Fully Modified (FMOLS) to deal both endogeneity cross-country heterogeneity. The results reveal that is negatively related domestic foreign income whereas real effective exchange rate depreciation improves long-run. However, do not confirm short-run worsening suggested by J-curve. In short-run, sensitive only but rate. country-level estimates show heterogeneity response rate, income. Overall, findings this suggest policies aimed at improving should focus on production imported goods, rather than devaluation.