Acta Universitatis Danubius. Œconomica, Vol 11, No 3 (2015)

Abstract

The current account balance (CAB) is one of the components of the balance of payments statistics and measures the external position of the country vis-à-vis other countries. Nigeria, Ghana and Cote’d’Ivoire, which are the main economic forces of West African region, though, have been facing turbulent current account dynamics over the past three-and-a-half decades, they have not been the subject of many empirical studies in a whole, despite the fact that the position of the current account is typically used as one of the main leading indicators for future behaviour of an economy. Against this backdrop, using a linear Vector Autoregressive (VAR) approach, this paper seeks to find out the key economic determinants of the size of the current account balance in the three selected West African countries. Our results show that all the variables, except the relative income (RELY), real effective exchange rate (REER) and domestic investment (INV) for Nigeria, Ghana and Cote’d’Ivoire respectively are important in explaining the long run relationship. However, there was no evidence of short run relationship between the variables and the current account balance in all the three countries.