The role of monetary models on describing the behaviour of the balance of payments inSudan during the period (1989-2009)

Abstract

The study examined the analysis of the behaviour of the balance of payments in Sudan during the period (1989- 2009). The study explored the effect of the monetary variables on the behaviour of the balance of payments during the period (1989-2009), the study aimed to identify these variables and their effect on Sudan�s balance of payment. The study main hypotheses included the following: The Sudan balance of payments behaviour can be explained through real factors specifically gross domestic product and aggregate expenditure within a monetary frame work, Allo an increase of the stock of net domestic assets my lead to an expansion in monetary policy this would tend to worsen the balance of payments through affecting nominal aggregate expenditure, nominal income, imports and exports. The study adopted a statistical approach using E-views programme to prove these hypotheses (Unit Root Test � Co integration � Vector analysis regression), and depended on secondary sources of data which include references, IMF reports, and bank of Sudan annual reports. The study main results include the following: The GDP and government expenditure are the main variables which explain the behavior of BOP in Sudan, and adopting an expansionary monetary policy will affect negatively the performance of BOP in the short run. The study call for the government to finance its budget deficit from real recourses instead of resorting to bank of Sudan to fill in the deficit by printing money since this policy may increase liquidity and money supply, thus affecting negatively both inflation and the performance of balance of payment.