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The Sustainability of African Current Account Deficits: A Panel Cointegration Analysis

Author

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  • Holmes, Mark J.

    (Department of Economics Waikato Management School University of Waikato)

Abstract

This study tests for the sustainability of current account deficits for a sample of twenty six African countries. For this purpose, a new test procedure advocated by Pedroni is employed which allows one to test for cointegration between exports and imports in heterogeneous panel datasets. This test uses more observations and exploits the cross-country variations of the data in estimation thereby yielding higher test power than alternative cointegration tests. An additional advantage associated with the Pedroni methodology is that we are able estimate the long-run relationships using fully modified and dynamic ordinary least squares and then test country-specific restrictions for long-run sustainability. Using annual data covering the period 1960-2000, this study finds strong evidence in favour of current account sustainability for eight African countries.

Suggested Citation

  • Holmes, Mark J., 2003. "The Sustainability of African Current Account Deficits: A Panel Cointegration Analysis," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 56(2), pages 243-253.
    • Handle: RePEc:ris:ecoint:0164
    as

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    More about this item

    Keywords

    LDC; current account; panel data; cointegration;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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