EFFECT OF CONSUMPTION ON CURRENT ACCOUNT OF OBOR NATIONS

David Y. Chen, North Carolina A&T State University, Greensboro, NC, U.S.A.

Published in

JOURNAL OF ACADEMY OF BUSINESS AND ECONOMICS
Volume 19, Issue 1, p25-36, March 2019

ABSTRACT

This paper investigates three macroeconomic relationships of twelve Asian/African countries by China’‘s Maritime Silk Road Initiative (1) consumption and current account, (2) consumption and foreign direct investment, and (3) trade and GDP per capita and money supply from a pre-initiative perspective. Results on the first relationship from a dynamic GMM model and 1990-2015 panel data indicate that changes in domestic consumption expenditures provide positive effect on stabilizing changes in current account in four countries: Malaysia, Thailand, China and the United States (for comparison), but negative effect in nine countries: India, Tanzania, Singapore, Bangladesh, Vietnam, Philippines, Indonesia, Pakistan, and Kenya. For the second relationship based on a SYS-GMM model we identify three countries Philippines, Vietnam and Kenya deem to be more vulnerable to Dutch Disease trap. We find no conclusive results on the third relationship whether trade variations are caused by changes in money supply or per capita GDP.

Keywords

Consumption, Current Account, FDI, Money Supply, Dutch Disease Trap


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