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The Determinants of Current Account Imbalances in Malawi

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  • Kwalingana, Samson
  • Nkuna, Onelie
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    Abstract

    Persistent current account imbalances in many least developed and emerging countries have excited considerable interest among researchers and policy makers to have a clear understanding of the dynamics of the current account and its role in macroeconomic outcomes. Based on the saving-investment theory, this paper uses cointegration analysis to identify the long run and short-run determinants of Malawi’s current account deficit using annual data from 1980 to 2006. Results suggest that openness, terms of trade, external debt accumulation, and current account liberalization fundamentally determined the current account deficit in Malawi. Furthermore, results reveal that these deficits have been, to a large extent, persistent.

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    File URL: http://mpra.ub.uni-muenchen.de/14694/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14694.

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    Date of creation: Apr 2009
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    Handle: RePEc:pra:mprapa:14694

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    Keywords: Current Account Balance; Saving-Investment Balances; Cointegration;

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    1. Goldstein, Morris & Khan, Mohsin S., 1985. "Income and price effects in foreign trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 20, pages 1041-1105 Elsevier.
    2. César Calderón & Alberto Chong & Norman Loayza, 1999. "Determinants of Current Account Deficits in Developing Countries," Working Papers Central Bank of Chile 51, Central Bank of Chile.
    3. Matthieu Bussière & Marcel Fratzscher & Author-Name: Gernot J. Müller, 2004. "Current account dynamics in OECD and EU acceding countries - an intertemporal approach," Working Paper Series 311, European Central Bank.
    4. Herrmann, Sabine & Jochem, Axel, 2005. "Determinants of current account developments in the central and east European EU member states - consequences for the enlargement of the euro area," Discussion Paper Series 1: Economic Studies 2005,32, Deutsche Bundesbank, Research Centre.
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    Cited by:
    1. Natalya Ketenci, 2010. "Major Determinants of Current Account in Russia," Transition Studies Review, Springer, vol. 17(4), pages 790-806, December.
    2. Chassem, Nacisse Palissy, 2011. "Effets de long terme du taux de change réel sur la balance commerciale nominale et réelle en zone Franc africaine
      [Long-run effects of real exchange rate on the nominal and real trade balance in       ," MPRA Paper 30252, University Library of Munich, Germany.

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