Capital Flows and Current Account Sustainability: The Ghanaian Experience

Maxwell Opoku-Afari

Discussion Papers from University of Nottingham, CREDIT

Abstract: Both theoretical and operational definitions of current account sustainability show a persistent and fragile current account balance (deficit) for Ghana. This has created a financing gap in the Ghanaian economy, typically filled by capital inflows, in particular aid. Even as Ghana depends to a large extent on aid inflows it has tended to be pro-cyclical. It is evident from the analysis that current account sustainability in Ghana is very sensitive to donor flow dynamics rather than trade flows. To make Ghanaian current account deficits sustainable a more stable and predominant trade contribution is required. Remittances from abroad are of increasing importance since 2000 and are relatively stable and counter-cyclical, and if managed can contribute to current account sustainability.

Keywords: Current Account; Sustainability; Capital Inflows (search for similar items in EconPapers)
Date: 2007-07
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Citations: View citations in EconPapers (4)

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