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External debt and current account adjustments: The role of trade openness

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  • Oyakhilome Wallace Ibhagui

Abstract

In this paper, we examine the various links among external debt, trade openness and current account in Sub-Saharan Africa, utilizing an approach that highlights current account from the perspective of saving and investment. We explore whether external debt aids the subsequent adjustment process of current account deficits in SSA. We also examine the role of openness in the adjustment process. Empirical analysis using large panel data samples of Sub-Saharan African countries between 1985 and 2013 shows that external debt mostly sets the tone for the subsequent adjustment of current account deficits in SSA. However, the current account deficits of countries with high openness expand significantly from increases in external debt. The results are robust to different time periods and econometric estimation techniques, the inclusion of other current account determinants as control variables and consideration of endogeneity.

Suggested Citation

  • Oyakhilome Wallace Ibhagui, 2018. "External debt and current account adjustments: The role of trade openness," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1446247-144, January.
    • Handle: RePEc:taf:oaefxx:v:6:y:2018:i:1:p:1446247
    DOI: 10.1080/23322039.2018.1446247
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    Cited by:

    1. Hodabalo Bataka, 2023. "Economic globalization and public debt in Sub‐Saharan Africa," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1756-1771, April.
    2. Kenny S, Victoria, 2019. "Effects of Human Capital Investment on Unemployment Volatility in Nigeria (1981-2015)," MPRA Paper 93295, University Library of Munich, Germany.
    3. Rajakaruna, Iwanthika & Suardi, Sandy, 2021. "The dynamic linkages between current account deficit and budget balance deficit in the South Asian region," Journal of Asian Economics, Elsevier, vol. 77(C).
    4. Kenny S, Victoria, 2019. "Macroeconomic Performance Indicators and Exchange Rate Misalignment in Nigeria," MPRA Paper 93292, University Library of Munich, Germany.
    5. Kenny S, Victoria, 2019. "Challenges of female entrepreneurship in Nigeria," MPRA Paper 93166, University Library of Munich, Germany.
    6. Kenny S, Victoria, 2019. "The role of agricultural sector performance on economic growth in Nigeria," MPRA Paper 93132, University Library of Munich, Germany.
    7. Kenny S, Victoria, 2019. "The Role of Public Sector Enterprise on Economic Development: A Case Study Of The Nigerian Power Sector (1981-2015)," MPRA Paper 93291, University Library of Munich, Germany.
    8. Kenny S, Victoria, 2019. "Exchange Rate Management and Economic Growth: An FMOLS Approach," MPRA Paper 93125, University Library of Munich, Germany.
    9. Kenny S, Victoria, 2019. "Determinants of Manufacturing Sector Performance and Its Contribution To Gross Domestic Product In Nigeria," MPRA Paper 93293, University Library of Munich, Germany.
    10. Aipoh, Godwin, 2019. "Comparative analysis of government spending, external debt, domestic credit to private sector, exchange rate and net investment to non-financial companies," MPRA Paper 92874, University Library of Munich, Germany.
    11. Kenny S, Victoria, 2019. "Manufacturing Sector Performance, Exchange Rate Volatility and Inclusive Growth In Nigeria (1981-2015)," MPRA Paper 93296, University Library of Munich, Germany.
    12. Ibrar Hussain & Umar Hayat & Md Shabbir Alam & Uzma Khan, 2024. "A Dynamic Analysis of the Twin-Deficit Hypothesis: the Case of a Developing Country," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(1), pages 25-52, March.
    13. Victoria S, Kenny, 2019. "Effect of Foreign Direct Investment and Economic Growth in Nigeria," MPRA Paper 92873, University Library of Munich, Germany.
    14. Kenny S, Victoria, 2019. "A causal relationship between unemployment and economic growth," MPRA Paper 93133, University Library of Munich, Germany.
    15. Kenny S, Victoria, 2019. "Employee productivity and organizational performance: A theoretical perspective," MPRA Paper 93294, University Library of Munich, Germany.
    16. Sakiru, Olatunji Y, 2019. "Economic growth, exchange rate and FDI: A comparative analysis of Nigeria and Ghana between the year 1990 to 2000," MPRA Paper 92849, University Library of Munich, Germany.

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