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The External Sector of Africa's EconomyCurrent Account Im(balances) and Adjustments to Targets for Regional Integration in West Africa: One Step Forward, Two Steps Backwards

The External Sector of Africa's Economy: Current Account Im(balances) and Adjustments to Targets... [In this paper, we seek to answer three main questions: first, what are the long- and short-run determinants of current account balances in West Africa; second, is there a sustainable path for the current account position that is consistent with regional integration; and if yes, what has been the process of adjustment towards such a path. We address these questions by first identifying the long-term determinants of the current account, and then using the results to calculate the equilibrium sustainable targets for the current account in the region. After accounting for short-run disequilibrium adjustment processes, we show how far apart each country is from the regionally sustainable path. The key findings are as follows: the determinants of current account dynamics differ depending on the time horizon; the real exchange rate, fiscal policy, trade openness, investment, and income levels are the key determinants in the short run; there is considerable variation in the deviation of each countries’ current account position from the regionally sustainable equilibrium path. Some implications for policy are highlighted.] http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png

The External Sector of Africa's EconomyCurrent Account Im(balances) and Adjustments to Targets for Regional Integration in West Africa: One Step Forward, Two Steps Backwards

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References (41)

Publisher
Springer International Publishing
Copyright
© Springer Nature Switzerland AG 2019
ISBN
978-3-319-97912-0
Pages
21 –49
DOI
10.1007/978-3-319-97913-7_2
Publisher site
See Chapter on Publisher Site

Abstract

[In this paper, we seek to answer three main questions: first, what are the long- and short-run determinants of current account balances in West Africa; second, is there a sustainable path for the current account position that is consistent with regional integration; and if yes, what has been the process of adjustment towards such a path. We address these questions by first identifying the long-term determinants of the current account, and then using the results to calculate the equilibrium sustainable targets for the current account in the region. After accounting for short-run disequilibrium adjustment processes, we show how far apart each country is from the regionally sustainable path. The key findings are as follows: the determinants of current account dynamics differ depending on the time horizon; the real exchange rate, fiscal policy, trade openness, investment, and income levels are the key determinants in the short run; there is considerable variation in the deviation of each countries’ current account position from the regionally sustainable equilibrium path. Some implications for policy are highlighted.]

Published: Apr 6, 2019

Keywords: Current account dynamics; Panel cointegration; Regional integration; West Africa; F32; F41; C33

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