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Is The Balancing Item For Australia Sustainable? Evidence From A Threshold Autoregressive Model With An Autoregressive Unit Root

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  • VINOD MISHRA
  • RUSSELL SMYTH
  • TUCK CHEONG TANG

Abstract

This article applies an unrestricted two-regime threshold autoregressive (TAR) model with an autoregressive unit root to examine the sustainability of the balancing item of the balance of payments for Australia from the first quarter 1960 to the second quarter 2006. The main finding is that the balancing item of the balance of payments in Australia is characterised by a non-linear, but stationary, series meaning that the balancing item is sustainable. This result implies that short-run volatility in the balancing item has no effect on the reliability of reporting of the balancing item in the long-run. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd/University of Adelaide and Flinders University.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Australian Economic Papers.

Volume (Year): 47 (2008)
Issue (Month): 2 (06)
Pages: 190-198

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Handle: RePEc:bla:ausecp:v:47:y:2008:i:2:p:190-198

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Cited by:
  1. Mei-yin Lin & Hui-hua Wang, 2009. "What Causes the Volatility of the Balancing Item?," Economics Bulletin, AccessEcon, vol. 29(4), pages 2738-2748.
  2. Tuck Cheong Tang & Evan Lau, 2008. "An Empirical Investigation On The Sustainability Of Balancing Item Of Balance Of Payment Accounts For Oic Member Countries," Development Research Unit Working Paper Series 31/08, Monash University, Department of Economics.

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