Global Value Chain Participation, Institutional Quality and Current Account Imbalances in the MENA Region

Foued Gabsi () and Rihab Bousnina ()
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Foued Gabsi: University of Sfax, Tunisia.
Rihab Bousnina: University of Sfax, Tunisia.

No 1556, Working Papers from Economic Research Forum

Abstract: This paper examines the relationship between the current account balance and participation in global value chains (GVCs) while considering institutional quality in the Middle East and North Africa (MENA) region over the period 2006-2018. We identify the key fundamentals of current account balances by estimating Bayesian Model Averaging (BMA) supplemented by the General-to-Specific (GETS) method. We find that integration into GVCs has a significant positive effect on the current account, conditional on institutional quality. These findings suggest that for MENA countries to better integrate into and benefit from GVCs, policies should target improvements in the institutional framework.Length: 35

Date: 2022-08-20, Revised 2022-08-20
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