Does real exchange rate devaluation improve the current account balance of highly indebted low income countries?

Getaneh Mihret Ayele

African Journal of Economic and Management Studies, 2019, vol. 10, issue 2, 212-225

Abstract: Purpose - The purpose of this paper is to examine whether real exchange rate devaluation improves the current account balance of four highly indebted low-income countries of East Africa. Design/methodology/approach - The pooled mean group (PMG) approach is used for panel data from four countries over the period 1970–2016. The paper also applied bound testing and ARDL model for time-series data from individual sample countries. Findings - The panel PMG/ARDL estimation result reveals that real exchange rate devaluation has no significant impact on the current account balance, both in the short and long run. However, the time-series analysis using the bound testing and restricted ARDL estimation suggests that real exchange rate devaluation improves the current account balance in the long run for only Ethiopia. The overall empirical results reveal that the current account balance would improve with the rising domestic income while it deteriorates with increasing foreign income and external indebtedness in the long run. Originality/value - The paper is original.

Keywords: East Africa; External debt; Current account balance; Exchange rate devaluation; LDCs (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-11-2017-0287

DOI: 10.1108/AJEMS-11-2017-0287

Access Statistics for this article

African Journal of Economic and Management Studies is currently edited by Prof John Kuada

More articles in African Journal of Economic and Management Studies from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().