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Short- And Medium-Term Determinants Of Current Account Balances In Middle East And North Africa Countries

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  • Aleksander Aristovnik

Abstract

The main aim of the paper is to examine the short- and medium-term empirical link between current account balances and a broad set of (economic) variables proposed by theoretical and empirical literature. The paper focuses on the Middle East and North Africa (MENA), an economically diverse region, which has so far mainly been neglected in such empirical analyzes. For this purpose, a (dynamic) panel-regression technique is used to characterize the properties of current account variations across selected MENA economies in the 1971-2005 period. The results, which are generally consistent with theoretical and previous empirical analyses, indicate that higher (domestic and foreign) investment, government expenditure and foreign interest rates have a negative effect on the current account balance. On the other hand, a more open economy, higher oil prices and domestic economic growth generate an improvement in the external balance, whereas the latter implies that the domestic growth rate is associated with a larger increase in domestic savings than investment. Finally, the results show a relatively high persistency of current accounts and reject the validity of the stages of development hypothesis as poorer countries in the region reveal a higher current account surplus (or lower deficit).

Suggested Citation

  • Aleksander Aristovnik, 2007. "Short- And Medium-Term Determinants Of Current Account Balances In Middle East And North Africa Countries," William Davidson Institute Working Papers Series wp862, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2007-862
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    References listed on IDEAS

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    Cited by:

    1. Chuku Chuku & Atan Johnson & Obioesio Felix & Onye Kenneth, 2017. "Working Paper 287 - Current Account Adjustments and Integration in West Africa," Working Paper Series 2407, African Development Bank.
    2. Oyakhilome IBHAGUI, 2017. "Understanding the sources of high current account fluctuations in 5 developed economies," Turkish Economic Review, KSP Journals, vol. 4(3), pages 250-274, September.
    3. Nurgun Topalli & İbrahim Dogan, 2016. "The structure and sustainability of current account deficit: Turkish evidence from regime switching," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(4), pages 570-589, June.
    4. Danica Unevska Andonova & Branimir Jovanovic, 2011. "Sustainability of the Macedonian Current Account," Working Papers 2011-06, National Bank of the Republic of North Macedonia.
    5. Yang, Lucun, 2011. "An Empirical Analysis of Current Account Determinants in Emerging Asian Economies," Cardiff Economics Working Papers E2011/10, Cardiff University, Cardiff Business School, Economics Section.

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    More about this item

    Keywords

    MENA countries; current account; determinants; dynamic panel data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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