The Effect of Institutional Quality on the Balance of Payments in African Countries. A Comparative Study

This study tries to examine the effect of the quality of the institutional framework on the accounts of the balance of payments in a sample of African countries (28 countries) and a sample of countries occupying advanced positions in international economics (15 countries) to determine different indicators of the institutional framework that affect the balances of the current and financial accounts of the balance of payments in the two sample countries through the period 2002-2019. The study applied the panel autoregressive distributed lag (ARDL) model, Akaike info criterion (AIC), to determine the short- and long-run relationships. The empirical findings illustrate that the institutional indicators that support the current accounts of the balance of payments, in the long run, are not the same that support the financial accounts of the balance of payments of African countries. In addition, the effect of institutional indicators on international transactions is related to the level of economic development, where the effect of institutional indicators on countries with relatively low levels of economic development is more powerful than their effects on countries with advanced levels of development. Thus, the low quality of the institutional framework is considered an important impediment to the development of international transactions in African countries.