Sustainability of current account balances in MENA countries: threshold cointegration approach

This document aims to determine the empirical link between current account balances and a set of economic variables proposed by the theoretical and empirical literature. To do this, we first use a generalized method of moments (GMM) dynamic panel regression technique to identify the key fundamentals of current account balances in certain economies in the Middle East and North Africa (MENA) region. Next, we estimate the link between exports and imports in order to test the sustainability of current account balances. To do this, the authors estimate a threshold cointegration model on a sample of 12 countries from the MENA region over the period 1970-2018. Nevertheless, the results show that the countries of the MENA region must put in place policies aimed at reducing their current account deficits in order to regain their external stability.

Automated summary

This paper utilizes GMM dynamic panel regression technique to identify key factors influencing current account balances in certain economies in the MENA region, and estimates the link between exports and imports to assess the sustainability of current account balances. The results suggest that MENA countries need to implement policies aimed at reducing current account deficits in order to restore external stability.