Analyzing Current Account Sustainability through the Saving-Investment Correlation

Economics Bulletin, 2017, vol. 37, issue 4, 2860-2870

Abstract: This article examines the sustainability of current account for three regions, namely, Europe & Central Asia (ECA), Latin America & Caribbean (LAC), and Sub-Saharan Africa (SSA) for the period 1981-2014. To this end, we apply the Pooled Mean Group estimator to test for the existence of cointegration between saving and investment. Our results suggest existence of long-run relationship between investment and savings. However, while the current account deficit is weakly sustainable in LAC and SSA, it is strongly sustainable in ECA. The adjustment coefficient is low, suggesting slower rate of convergence to the long-run equilibrium.

Keywords: Current Account; Sub-Saharan Africa; Latin America & Caribbean; Dynamic Panel Data; Panel ARDL; Pooled Group Mean (PMG) estimator. (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Date: 2017-12-28
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Citations: View citations in EconPapers (2)

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