Interrogating the association between current account and economic complexity

Abstract

The study was meant to provide a comparative analysis of the association between economic complexity and the current account performance for selected Sub-Saharan Africa and the BRICS group. Economic complexity measures the sophistication of a country’s productive structure by combining information on the diversity of a country (the number of products it exports), and the ubiquity of its products (the number of countries that export that product). The objective was to investigate whether a short- and long-term relationship exists through a Panel Autoregressive Distributed Lag (PARDL) for 1994 – 2018. Additionally, agricultural exports were also incorporated to measure against the economic complexity Index (ECI). On the current account-ECI relationship, the PARDL estimates exposed a positive and significant impact from ECI on the current account performance in both groups in the long run, while short-run results were insignificant. On the other hand, agricultural exports were an insignificant predictor of the current account in both groups in the long run. However, only the BRICS realised a significant negative contribution in the short-run. Hence, it is essential, especially the still developing selected SSA, to improve upon its ECI to facilitate a current account improvement better. There is a need to modernise the agricultural and agro-industries in the selected SSA. The region should harness the full potential of its agricultural sector and also the overall, abundance of raw resources to advance process-led products for the export market.

Keywords: {'name': 'Current account, Economic complexity, Sub-Sahara Africa, BRICS, PARDL.'}

Authors & affiliations

Sehludi Molele
Affiliation not supplied

Thobeka Ncanywa
Affiliation not supplied

Deposited references

Supplied references, not a list of publications citing this article.

Appleyard, D. R. and Field, A. J. (2014). International Economics. 8th Edition. Mcgraw-Hill/Irwin.

Bhorat, H., Steenkamp, F. and Rooney, C. (2017). Sub-Saharan Africa’s Manufacturing Sector: Building Complexity. 256. Abidjan. Available At: Https://Www.Afdb.Org/En/Documents/Publications/Working-Paper-Series/. Available at: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/WPS_No_256_Manufacturing__Employment-Complexity_Analysis_Zc_.pdf (Accessed: 17 July 2029).

Bhorat, H., Steenkamp, F., & Rooney, C. (2016). Africa’s manufacturing malaise (No. 2063-2018-649). http://dx.doi.org/10.22004/ag.econ.267780

DOI: 10.1016/j.sbspro.2015.11.359

DOI: 10.1007/978-1-349-27014-9_21

Canh, N.P. and Thanh, S.D., (2020). The dynamics of export diversification, economic complexity and economic growth cycles: Global evidence. Foreign Trade Review, 1 – 27. p.0015732520970441.

DOI: 10.1007/BF02706568

DOI: 10.2307/1913236

DOI: 10.1016/j.sbspro.2015.06.262

DOI: 10.2139/ssrn.3403305

Hufbauer, G.C. (1966). Synthetic materials and the theory of international trade. London Duckworth Publishers.

DOI: 10.1016/S0304-4076(03)00092-7

DOI: 10.1016/j.techfore.2017.04.007

Jetter, M., Ram?rez Hassan, A. (2013). The Roots of Export Diversification. Doc. Trab. Econ. Invest. Econ. Finance. (CIEF) 13 (02). https://ideas.repec.org/p/col/000122/010600.html.

Kanbur, R., Steenkamp, F., Rooney, C., & Bhorat, H. (2017). Sub-Saharan Africa’s Manufacturing Sector: Building Complexity. https://hub.cepr.org/

DOI: 10.1002/jae.616

DOI: 10.1016/j.worlddev.2004.01.001

MIT Atlas. (2018). Economic Complexity Index. https://oec.world/en/rankings/eci/hs6/hs96?tab=table.

Muhammad A, Muhammad S, F, Hafiz K, A, Ishrat B and Quddus M. A. (2010). Relationship Between School Education and Economic Growth In Pakistan: ARDL Bounds Testing Approach to Cointegration. Pakistan Economic and Social Review, 48 (1), 39-60. https://www.jstor.org/stable/41762413.

DOI: 10.1002/jae.616

DOI: 10.1093/oxfordjournals.oep.a040877

Raschen, M. (2014). The Problem of Balance of Payment Imbalances. Kfw Economic Research, 4:1 - 7. Available at: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.kfw.de/PDF/Download-Center/Konzernthemen/Research/PDF-Dokumente-Fokus-Volkswirtschaft/Fokus-englische-Dateien/Fokus-2014-EN/Fokus-Nr.-44-Februar-2014-EN.pdf (Accessed: 19 October 2020).

Smith, A. (1876). The Wealth of Nations Edited by R. H. Campbell and A. S. Skinner. The Glasgow Edition of the Works and Correspondence of Adam Smith, 2a.

DOI: 10.1007/BF02708115

DOI: 10.35188/UNU-WIDER/2020/898-6

Stojkoski, V. and Kocare, L. (2017). The Relationship Between Growth and Economic Complexity: Evidence From South Eastern and Central Europe. Online at https://mpra.ub.uni-muenchen.de/77837/. https://mpra.ub.uni-muenchen.de/77837/

DOI: 10.1371/journal.pone.0161633

DOI: 10.1371/journal.pone.0200822

Verbeek, M. (2004). A Guide to Modern Econometrics. 2nd Edition. Erasmus University Rotterdam : John Wiley and Sons.

DOI: 10.2307/1880689

Yalta, A. Y., & Yalta, T. (2021). Determinants of economic complexity in MENA Countries. JOEEP: Journal of Emerging Economies and Policy, 6(1), 5-16.

DOI: 10.1016/j.worlddev.2013.05.017