Are Current Account Deficits Sustainable among African Countries? A Panel Cointegration Approach

Emmanuel Anoruo and Chinedu Ezirim

The IUP Journal of Applied Economics, 2005, vol. IV, issue 1, 67-78

Abstract: Recurring and massive current account deficits are troublesome especially for developing African countries that rely on foreign capital. The conventional wisdom holds that persistent deficits impose taxes on future generations and lead to high interest rates. Given their policy implications, this paper uses panel cointegration tests and the fully modified OLS estimation techniques to explore the sustainability of current account deficits among 15 African countries. The results from the panel fully modified OLS estimates suggest that the current deficits are not sustainable among the sample countries. However, on country-by-country basis, Nigeria appears to be the only country that has the ability to meet its external intertemporal balance requirement. Taken together, the results suggest that for most of the sample countries, the current account deficits are not sustainable with the exception of Nigeria.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjae:v:04y:2005i:1p:79-86

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