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Current account and financial reforms: Evidence from sub‐Saharan Africa
Author(s) -
Onwuka Kelvin,
Chukwu Anayochukwu Basil,
Agbanike Tobechi Faith
Publication year - 2021
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.2015
Subject(s) - current account , economics , deregulation , balance of trade , monetary economics , devaluation , currency , inflation (cosmology) , capital account , macroeconomics , net foreign assets , panel data , per capita , international economics , exchange rate , econometrics , population , physics , demography , sociology , theoretical physics
This study investigates the relationship between financial deregulation and current account imbalances in a panel of 14 Sub‐Saharan African countries over the period 1990–2015. While there are plethora of studies linking financial (de)regulation and economic crisis, the relationship between financial deregulation and current account imbalances has received little attention to date in the growth literature. Relying on the Classical‐Keynesian theoretic perspective, the study adopted the fixed‐effects panel least square estimation technique to determine the effects of financial reforms on current account balance. Our results are robust, suggesting a significant but negative relationship between financial reforms and current account balance. The results further suggest that factors that positively affect current account balance include terms of trade, inflation rate, gross domestic savings, per capita income, and net foreign assets. A policy shift towards improving terms of trade, and gross domestic savings, through expansion in aggregate output and devaluation of the domestic currency will increase internal market competitiveness within the region.