The Effects of Global Value Chain Participation on Current Account Balances in African Economies: Does it Matter Being a Landlocked Country?: An Empirical Review
Journal of Economics, Management and Trade,
The general objective of this paper is to evaluate the effects of Global Value Chain Participation (GVCP) on Current Account Balance (CAB) in African countries. The specific objectives are to (1) identify the type of GVCP that contributes more significantly and positively to African countries’ current account balance and (2) find out whether being landlocked affects a country’s participation in global value chain in Africa. This paper uses panel data from three secondary sources: (1) UNCTAD-EORA database (2018) for forward and backward participation indicators, (2) WDI (2018) for current account balance, FDI, population and trade openness and (3) PWT 9.1 for exchange rates. In a linear panel specification, this research applies the Feasible Generalized Least Square (FGLS) econometric techniques and results highlight firstly that forward GVCP contributes more significantly and positively to CAB in Africa with a coefficient ranging between 1.64 and 2.43 in various regressions. Secondly, the effect of GVCP on CAB is reduced in landlocked African countries as revealed in its negative and significant coefficient of -2.33 as the variables are interacted. This paper recommends that, African countries should embark on forward participation and improve connectivity infrastructure to facilitate the participation of landlocked African economies in global interactions.
- Global value chain participation (GVCP)
- current account balance (CAB)
- African countries; landlocked African countries
How to Cite
Opoku-Afari M. Capital flows and current account sustainability: Research paper at www. Nottingham.ac.uk/economics/credit.; 2005.
Osakwe P, Verik S. Current Account Deficit in Sub-saharan Africa. Do they matter? United Nations Commission for Africa. 2007;201-220.
Boljanovic S. A Sustainability Analysis of Serbia’s CA Deficit, Serbia. Economic Annals. 2012;57(195):0013-3264.
Ben S, Jodie K, Poorvi G. Connectivity and Global Value Chain Participation: Cost and Capability Considerations. The Common Wealth. Trade Hot Topics; ISSUE. 2016;136.
Baldwin R. Global supply chains: why they emerged, why they matter, and where they are going, in Elms, D. and Low, P. (eds.), Global value chains in a changing world, WTO Secretariat; and United Nations Conference on Trade and Development (UNCTAD); 2013.
Taguchi H. Domestic value creation in global value chains in Asian economies. Saitama University; MPRA. 2018;89741, posted 30 Oct 2018 00:41.
Gereffi G, Fernandez-Stark K. Global Value Chain Analysis: A Primer. Second Edition. The Duke Center on Globalization, Governance & Competitiveness; 2016
Ikuo K. Mapping Agricultural Value Chain with International Input-Output data. IDE discussion. 2016;623.
Johnson RC, Noguera G. Accounting for Intermediates: Production Sharing and Trade in Value Added. Journal of International Economics. 2012;86(2):224-236.
Wang Z, Wei S-J, Zhu K. Quantifying international production sharing at the bilateral and sector levels. National Bureau of Economic Research; 2013.
OECD-WTO. Database on Trade in Value-Added First Estimates. 16 January 2013”, Paris: OECD; 2013.
Bilal L, Mohamed K. Competitiveness Determinants of Moroccan Exports: Quantity-Based Analysis. International Journal of Economics and Finance. Published by Canadian Center of Science and Education. 2016;8(7): 2016 ISSN 1916-971X E-ISSN 1916-9728.
Ifedapo A, Mark E. Africa’s competitiveness in the Global economy. Book series: AIB Sub-Saharn Africa (SSA) series. Springer International Publishing; Print ISBN: 978-3-319-67013-3; Electronic ISBN. 2018;978-3-319-67014-0.
Klaus S. The Global Competitiveness Report (2019). World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland. ISBN-13: 978-2-940631-02-5. The Report and an interactive data platform are; 2019.
UNCTAD. World Investment report 2013: Global Value Chains: Investment and Trade for Development. United Nations Conference on Trade and Development, United Nations Publication. ISBN 978-92-1-112868-0; 2013.
Miroudot S, Lanz R, Ragoussis A. Trade in intermediate goods and services. OECD Publishing. OECD Trade Policy Working Paper No. 2009;93.
Hummels D, Jun I, Kei-Mu Y. The Nature and Growth of Vertical Specialization in World Trade. Journal of International Economics. 2001;54(1).
Stehrer R, de Vries GJ, Los B, Dietzenbacher H, Timmer M. The World Input Output Database: Content, Concepts and Applications; 2014.
Casella B, Bolwijn R, Moran D, Kanemoto K. Improving the Analyses of GVC: the UNCTAD-EORA database. New York and Geneva: United Nations; 2019.
Sachs J. The Current Account and Macroeconomic Adjustment in the 1970s’. Brookings Papers on Economic Activity. 1981;1:201-282.
Obstfeld M, Rogoff K. The Intertemporal Approach to the Current Account. In G. Grossman and K. Rogoff (eds.), Handbook of International Economics. 3. Amsterdam: North Holland. 1995;1731-1799.
Glick R, Rogoff K. Global versus Country-Specific Productivity Shocks and the Current Account. Journal of Monetary Economics. 1995;35:159-192.
Razin A. The Dynamic-Optimizing Approach to the Current Account: Theory and Evidence. In P. Kenen (ed.) Understanding Interdependence: The Macro-economics of the Open Economy. NJ: Princeton; 1995.
Backhaus JG. Handbook of history of economic thought: insights of the foundation of modern economics. The European heritage in economics and the social sciences. Springer New York Dordrecht Heidelberg London. Library of Congress; 2012. ISBN 978-1-4419-8335-0.
Reinhard S. Adam Smith, the Patterns of Foreign Trade and the Division of Labour: A Country as a Jack-of All-Trades Rather Than a Specialist. Center for the history of political economy at duke university. Chope Working Paper No. 2016-22;2016.
Smith A. An Inquiry into the Nature and Causes of the Wealth of Nations. [WN], R. H. Campbell and A. S. Skinner (eds), The Glasgow Edition of the Works and Correspondence of Adam Smith: Oxford University Press. 1976;2a and 2b.
Coffey WJ. The “newer” international division of labour. in P.W. Daniels and W.F. Lever (eds), The Global Economy in Transition, Longman, Harlow. 1996;40–61.
Kherrazi S. ‘L’essor des Chaînes de Valeur Mondiales : l’impératif d’une stratégie duale pour l’Afrique’. Revue de Management et de Stratégie,. www.revue-rms.fr2015;2-5. French
Frobel FH, Heinrichs J, Kreye O. The new international division of labour. Social Science Information. 1978;17(1):123–42.
Eaton J, Kortum S. Technology, Geography, and Trade. Econometrica. 2002;70(5):1741-1779.
Dornbusch R, Fischer S, Samuelson PA. Comparative Advantage Trade and Payments in Ricardian Model with Continuum of Goods. The American Economic Review. 1977;67(5):823-839.
Shiozawa Y, Fujimoto T. The nature of international competition among firms. In T. Fujimoto and F. Ikuine (eds.) Industrial Competitiveness and Design Evolution, Tokyo, Springer Japan; 2018.
Grossman G, Rossi-Hansberg E. The Rise of Offshoring: It’s Not Wine for Cloth Anymore. American Economic Review. 2006;98(5): 978-97.
Porter M. Competitive Advantage: Creating and sustaining superior performance. New York: Free Press; 1985.
Brumm, J, Georgiadis G, Grab J, Trottner F. Global Value Chain Participation and Current Account Imbalances. Journal of International Money and Finance. DOI:10.1016/j.jimonfin.2019.01.018; 2019.
Jane H. Have Global Value Chain contributed to Global Imbalances? International Finance discussion paper: number 1154; ; 2015.
OECD. GVC participation in the agriculture and food sectors. Trade and Agriculture Directorate: Joint Working Party on Agriculture and Trade. Available at TAD/TC/CA/WP(2016)1/PART2/FINAL. JT03408256; 2016.
Gilhaimé M, Jiong. Determinants of global value chains participation for landlocked countries. International Journal of Social Science and Economic Research. ISSN: 2455-8834. 2019;04(05).
Paudel RC, Cooray A. Export performance of developing countries: Does landlockedness matter? Rev Dev Econ. 2018;00:1–27.
Available:https://doi.org/ 10.1111/rode.12389; 2018.
Raballand G. Determinants of the negative Impact of being landlocked on Trade: An Empirical Investigation through the Central Asian case. Comparative Economic Studies. 2003;45.
Kenfack GF, Ningaye P, Kuipou TC. Global Value Chain Participation and Current Account Balances in Landlocked African Countries. Journal of Economics, Management and Trade. 2020;26(2):1-14. Article no. JEMT.54987 ISSN: 2456-9216; 2020.
Debelle G, Farquee H. What Determines the Current Account? A Cross-Sectional and Panel Approach” IMF Working Paper 96/58; 1996.
Brissimis SN, Hondroyannis G, Papazoglu C, Tsaveas NT, Vasardani MA. Current Account Determinants and External Sustainability in Periods of Structural Change. European Central Bank Working Paper Series. 2010;1243.
FAO. Global and Agro-Food Value Chains Participation, determinants and trade policy with a focus on Sub Saharan countries. (Second Draft); 2016.
Limao N, Venables AJ. Infrastructure, geographical disadvantage, transport costs, and trade. World Bank Economic Review. 2001;15(3):451–479.
Behar A, Venables AJ. Transport costs and international trade. In R. L. Andre de Palma, Emile Quinet, and Roger Vickerman (Eds.), A handbook of transport economics. 2011;97–115.
Clarke GR. Beyond tariffs and quotas: Why don’t African manufacturers export more? Policy Research Working Paper 3617. Washington, DC: World Bank; 2005.
Gheorghe H, Maria-Isadora, L, Madalina EP. An assessment of enhanced competitiveness through fiscal devaluation. Procedia Economics and Finance. 2015;22:262 – 267. Economic Scientific Research - Theoretical, Empirical and Practical Approaches’, Bucharest, Romania, 2015;13-14.
Luljeta S, Merale FV, Murat S, Nimete B. The persistence and determinants of current account deficit of FYROM: An empirical analysis. ScienceDirect: Available online at www.sciencedirect.com. Procedia Economics and Finance. 2015;33.
Agyapomaa G, Abena DO, Ebo T, Twumasi PB, Abbey EN. Ghana's Participation in Global Value Chains: The Employment Effects. Swiss programme for research on global issues for development. World Trade Institute. R4D Working Paper 2017/05; 2017.
Anderson JE, van Wincoop E. Gravity with gravitas: A Solution to the border puzzle. American Economic Review. 2003;93(1):170–192.
Evenett SJ, Keller W. On theories explaining the success of the gravity equation. Journal of Political Economy. 2002;110(2):281-316.
Abstract View: 133 times
PDF Download: 41 times