Testing the Triple Deficit Hypothesis for Sub-Saharan Africa: Implications for the African Continental Free Trade Area

Okafor, Samson and Ekesiobi, Chukwunonso and Ifebi, Ogonna and Dimnwobi, Stephen and Asongu, Simplice (2021): Testing the Triple Deficit Hypothesis for Sub-Saharan Africa: Implications for the African Continental Free Trade Area. Forthcoming in: African Development Review

Abstract

Aware of the nature of deficits in the current account, fiscal account, and the financial account balances of the countries in the Sub-Saharan Africa (SSA) region, this inquiry assessed the relationship between these deficits and the implication of such relationship for the African Continental Free Trade Area (AfCFTA). To do this, the study adopted panel data analysis techniques using the Pooled Mean Group-Autoregressive Distributed Lag (PMG-ARDL) specifications to test for the Triple Deficit Hypothesis (TDH) in the region. The findings of the study revealed the presence of the TDH in SSA where bidirectional causality exists between current account balance and budget balance, and between saving gap and current account balance, with a unidirectional causality running from budget balance to saving gap. The adoption of sound fiscal, monetary, and trade interventions in the region constitutes the major policy recommendations.

• Item Type: MPRA Paper
• Language: English
• Keywords: Triple Deficit Hypothesis; Sub-Saharan Africa; African Continental Free Trade Area
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa

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