Impact of Geoeconomic Fragmentation on Macroeconomic Performance in West Africa: The Moderating Role of Governance

Abstract

Many studies projected that the consequences of geoeconomic fragmentation would vary across regions and will be more severe in developing countries particularly those that are more dependent on commodity trade, it is therefore imperative to carry out a regional-specific study. Hence, this study investigates the partial effects of six fragmentation measures on economic performance in the West African Sub-region. The study further examines the total impact of fragmentation while accounting for the moderating influence of governance indicators. Panel data from fourteen West African countries from 1991 to 2022 were analysed using fixed effect within and random effect GLS estimators, while the preferred method was chosen using the Hausman specification test. The results show that all the forms of fragmentation in terms of trade restrictions are harmful to the economic performance of West African countries, with exchange and export restrictions having the largest consequences. However, improvement in governance reduces the negative effects of fragmentation. Particularly, improvement in control of corruption, government effectiveness, regulatory quality, and the rule of law can moderate the impact of fragmentation. It is recommended that efforts should be intensified to improve the quality of governance in West Africa countries to mitigate the negative consequences of the growing trend of fragmentation due to rising geopolitical tensions across the globe.