Explanatory factors for the balance of current transactions in the CEMAC zone

Abstract

Most of the countries in Central Africa have recorded current account deficits since the coronavirus pandemic in 2020. The aim of this article is to identify the main factors explaining the behavior of the current account balances of CEMAC member countries. Using a dynamic panel autoregressive distributed lag (ARDL) model, we use annual data for the period 1970-2018. The results indicate that there is a long-run relationship between the current account balance of the CEMAC countries and the explanatory variables (real exchange rate, terms of trade, domestic savings, GDP growth rate, domestic investment, inflation rate, oil price). We also show that domestic investment boosts the competitiveness of the countries concerned, that domestic savings are directed towards the consumption of foreign goods, that oil revenues do not fuel productive investment, and that there is a structural difference between the CEMAC countries; thus, the terms of trade have an asymmetrical effect on their current accounts. The results of this study lead to recommendations to the effect that diversifying the productive base of CEMAC countries is the most effective way of enabling them to rebalance their current account balances in the long term and reduce their vulnerability to external shocks.