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.