Current Account Im(balances) and Adjustments to Targets for Regional Integration in West Africa: One Step Forward, Two Steps Backwards

Chuku Chuku, Johnson Atan, Felix Obioesio and Kenneth Onye
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Johnson Atan: University of Uyo
Felix Obioesio: University of Uyo
Kenneth Onye: University of Uyo

A chapter in The External Sector of Africa's Economy, 2019, pp 21-49 from Springer

Abstract: 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.

Keywords: Current account dynamics; Panel cointegration; Regional integration; West Africa (search for similar items in EconPapers)
JEL-codes: C33 F32 F41 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:spr:aaechp:978-3-319-97913-7_2

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DOI: 10.1007/978-3-319-97913-7_2

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