Title: Determinants of the current account balance in Lesotho: a structural vector autoregression analysis

Authors: Moeti Damane; Maselone Thite

Addresses: Central Bank of Lesotho, P.O. Box 1184, Maseru 100, Lesotho ' Central Bank of Lesotho, P.O. Box 1184, Maseru 100, Lesotho

Abstract: This paper investigates the macroeconomic factors that affect the current account balance in Lesotho and the interrelations among these factors using the structural vector autoregression (SVAR) framework and annual time series data from 1980 to 2015. The main results of the study show that variations in the current account are mostly influenced by own shocks and shocks in the trade balance. Policy recommendations are for the Government of Lesotho (GoL) to encourage and support a deliberate export oriented approach to trade anchored on product diversification and value addition. This will foster competitiveness of Lesotho's exports in the international markets and yield a favourable current account position.

Keywords: current account balance; structural vector autoregression; SVAR; impulse response function; IRF; forecast error variance decomposition; FEVD; historical decomposition; Lesotho.

DOI: 10.1504/IJSE.2019.099041

International Journal of Sustainable Economy, 2019 Vol.11 No.2, pp.141 - 166

Received: 28 Aug 2018
Accepted: 19 Nov 2018
Published online: 12 Apr 2019 *

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