Are African Current Account Deficits Different? Stylized Facts, Transitory Shocks, and Decomposition Analysis
IMF Working Papers, January 1, 2001
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- Are African Current Account Deficits Different? Stylized Facts, Transitory Shocks, and Decomposition Analysis
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Bibliographic details
- Authors: Luisa Zanforlin, César Calderón, Alberto Chong
- Published: January 1, 2001
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451842043.001
Summary findings
- Current account deficits in Africa are not very persistent.
- Deficits are positively linked with domestic growth.
- Deficits are strongly linked with public (and private) savings, suggesting that fiscal consolidation in IMF-supported programs may be relatively effective.
- Deficits are linked with aid flows, which act to close the external gap.
- Deficits are linked with currency depreciation and the terms of trade.
- The deficit is described as "excessive," being almost 3 percent of the gross national disposable income above the equilibrium level.
Analysis and methodology
- The paper analyzes the behavior of current account deficits in Africa and estimates whether the deficits are excessive with respect to fundamentals.
- The title and keywords indicate use of Decomposition Analysis and Dynamic Panel Data Models to study long-run current account deficit behavior and transitory shocks (as reflected in the paper’s focus on stylized facts, transitory shocks, and decomposition analysis).
Policy implications and interpretation
- Because deficits are strongly linked to public (and private) savings, fiscal consolidation under IMF-supported programs may be relatively effective in addressing current account imbalances.
- Aid flows play a role in closing external gaps, implying that aid dynamics are an important factor in current account adjustment.
- Exchange rate movements (currency depreciation) and terms-of-trade changes are important determinants of current account behavior and should be considered in policy responses.
Key statistics and descriptors
- Publication date: January 1, 2001
- Pages: 40
- The deficit is almost 3 percent of the gross national disposable income above the equilibrium level.
- Subjects: Balance of payments; Current account; Current account balance; Current account deficits; International trade; National accounts; Private savings; Terms of trade
- Keywords include: Africa; behavior of the current account deficit; Current Account; current account adjustment; Current account balance; current account behavior; current account deficit; Current account deficits; current account determination; current account effect; current account fluctuation; current account reversal; current account sustainability; Decomposition Analysis; Dynamic Panel Data Models; long-run current account deficit; Private savings; rate of growth; Terms of trade
IMF Working Paper: "Are African Current Account Deficits Different? Stylized Facts, Transitory Shocks, and Decomposition Analysis" (Luisa Zanforlin, César Calderón, Alberto Chong).