Impact of International Trade and Trade Duties on Current Account Balance of the Balance of Payment: A study of N-11 Countries

Abstract

This study is aimed to investigate the impact of international trade and trade duties upon the current account balance of the balance of payment of N-11 countries. Two constituents of each factor have been considered for the purpose of analysis. For International trade, import (IMPT) and export (EXPT) of goods and services have been considered whereas, for trade duties, taxes on international trade (TOIT) and customs and other import duties (CID) have been taken as the research variables whereas, current account balance (CAB) has been taken as the dependent variable. For the purpose of analysis panel data of N-11 countries for 27 years from 1990 to 2016 has been tested using different econometric technique such as Panel unit root test, Panel co-integration test, Hausman test, Panel regression analysis and Panel causality analysis. The results demonstrate that overall research variables are co-integrated and having long term relationship and affecting each other in the conventional manner. Notably, it is observed via results that in case of N-11 countries the CAB itself is the regulating factor and all other factors are adjusted according to the movement of CAB. The study provides recommendations for the rectification of current account deficit position and also provides scope for future research as well.

Impacts of Regional Integration and Market Liberalization on Bilateral Trade Balances of Selected East African Countries: Potential Implications of the African Continental Free Trade Area

“…These results for Uganda are similar to those of Arif et al (2020), who found a negative relationship between international trade taxes and current account balances for the next eleven (N-11) countries (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam). Furthermore, the insignificant coefficients showing no effect of tariff changes on the trade balances for Kenya, Tanzania, and Rwanda in the period of 2000-2020 suggest that tariff removal may not improve the trade balances of these countries within Africa.…”