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Current Account Sustainability of ECOWAS Countries

Author

Listed:
  • Yaya Sissoko
  • Niloufer Sohrabji

    (Indiana University of Pennsylvania)

Abstract

This paper examines current account sustainability of eight countries in the Economic Community of Western African States (ECOWAS); Burkina Faso, Côte d'Ivoire, Ghana, Mali, Niger, Nigeria, Sénégal and Togo. The paper uses the intertemporal solvency framework of Hakkio and Rush (1991) and Husted (1992) and cointegration methodology to test for a long run relation between exports and imports items of the current account. Further, we estimate this long-run relationship using dynamic OLS. Our results show that only Sénégal and Togo have sustainable current account positions. Of the others, Ghana and Niger have a statistically significant relation between exports and imports although it is not strong enough, and thus they continue to have vulnerable current account positions. The rest of the countries have unsustainable current account deficits. The paper argues that monetary, trade and political reforms are necessary to reduce vulnerabilities in external positions.

Suggested Citation

  • Yaya Sissoko & Niloufer Sohrabji, 2012. "Current Account Sustainability of ECOWAS Countries," The African Finance Journal, Africagrowth Institute, vol. 14(2), pages 1-22.
    • Handle: RePEc:afj:journl:v:14:y:2012:i:2:p:1-22
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    Citations

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    Cited by:

    1. Özcan Karahan, 2020. "Sustainability of Current Account Deficit in Turkey," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 13(2), pages 62-69, September.
    2. Garg, Bhavesh & Prabheesh, K.P., 2021. "Testing the intertemporal sustainability of current account in the presence of endogenous structural breaks: Evidence from the top deficit countries," Economic Modelling, Elsevier, vol. 97(C), pages 365-379.

    More about this item

    Keywords

    Current Account; Intertemporal solvency; Sustainability; ECOWAS;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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