Manufacturing Sector Output And Economic Performance In West Africa: Panel Analysis

Abstract

This study examines the impact of manufacturing sector output on economic performance in West Africa using both theoretical and econometric approaches. Economic performance is treated as the dependent variable, while manufacturing sector output serves as the key independent variable, alongside other macroeconomic controls. The analysis covers the period 1990–2023 and employs second generation econometric techniques to account for cross-sectional dependence and heterogeneity across countries. Preliminary analyses include cross-sectional dependence (CD) tests and panel unit root tests based on the Cross-Sectionally Augmented Dickey-Fuller (CADF) approach. The results reveal the presence of cross-sectional dependence and a mixed order of integration among variables, justifying the use of the Panel Autoregressive Distributed Lag (ARDL) model. The Westerlund error-correction-based cointegration test confirms the existence of a long-run equilibrium relationship among manufacturing output, economic growth, capital formation, inflation, and exchange rate. The Pooled Mean Group (PMG) estimator is employed to estimate both short-run and long-run dynamics. The findings indicate that manufacturing output has a positive and statistically significant effect on economic performance in both the short and long run. The error correction term is negative and significant, suggesting a stable adjustment toward long-run equilibrium. However, the results also indicate that manufacturing growth has not sufficiently translated into employment generation, pointing to jobless growth in the region. The study recommends strengthening industrial policies, improving infrastructure, enhancing access to finance, and promoting value addition and export-oriented manufacturing to achieve sustainable and inclusive growth.

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