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Analyzing Current Account Sustainability through the Saving-Investment Correlation

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  • Santosh Kumar Dash

    (Institute for Financial Management and Research)

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.

Suggested Citation

  • Santosh Kumar Dash, 2017. "Analyzing Current Account Sustainability through the Saving-Investment Correlation," Economics Bulletin, AccessEcon, vol. 37(4), pages 2860-2870.
    • Handle: RePEc:ebl:ecbull:eb-17-00810
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    2. Olufemi G. Onatunji, 2023. "Sustainability of current account deficits in Nigeria: evidence from the asymmetric NARDL approach," SN Business & Economics, Springer, vol. 3(10), pages 1-22, October.

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    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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