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On the Stationarity of Current Account Deficits in the European Union

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  • Mark J. Holmes
  • Jes�s Otero
  • Theodore Panagiotidis

Abstract

In this paper, we test for the stationarity of EU current account deficits. Our testing strategy addresses two key concerns with regard to unit-root panel data testing, namely (i) the identification of which panel members are stationary, and (ii) the presence of cross-sectional dependence. For this purpose, we employ an AR-based bootstrap approach to the Hadri (2000 ) test. While there is only mixed evidence that current account stationarity applies when examining individual countries, this does not appear to be the case when considering panels comprising both EU and non-EU members. Copyright � 2010 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 18 (2010)
Issue (Month): 4 (09)
Pages: 730-740

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Handle: RePEc:bla:reviec:v:18:y:2010:i:4:p:730-740

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  1. Trehan, Bharat & Walsh, Carl E, 1991. "Testing Intertemporal Budget Constraints: Theory and Applications to U.S. Federal Budget and Current Account Deficits," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 23(2), pages 206-23, May.
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  6. Wickens, M. R. & Uctum, Merih, 1993. "The sustainability of current account deficits : A test of the US intertemporal budget constraint," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 17(3), pages 423-441, May.
  7. Yoosoon Chang, 2000. "Bootstrap Unit Root Tests in Panels with Cross-Sectional Dependency," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 1585, Econometric Society.
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  10. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220 National Bureau of Economic Research, Inc.
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  12. Husted, Steven, 1992. "The Emerging U.S. Current Account Deficit in the 1980s: A Cointegration Analysis," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 159-66, February.
  13. Mark J. Holmes, 2006. "How Sustainable Are Oecd Current Account Balances In The Long Run?," Manchester School, University of Manchester, vol. 74(5), pages 626-643, 09.
  14. Josep Carrion-i-Silvestre & Andreu Sansó, 2006. "A guide to the computation of stationarity tests," Empirical Economics, Springer, Springer, vol. 31(2), pages 433-448, June.
  15. Taner Yigit, 2002. "Shortfalls of Panel Unit Root Testing," Departmental Working Papers, Bilkent University, Department of Economics 0208, Bilkent University, Department of Economics.
  16. Georgios Chortareas & George Kapetanios & Merih Uctum, 2003. "An Investigation of Current Account Solvency in Latin America Using Non Linear Stationarity Tests," Working Papers, Queen Mary, University of London, School of Economics and Finance 485, Queen Mary, University of London, School of Economics and Finance.
  17. Chortareas Georgios E & Kapetanios George & Uctum Merih, 2004. "An Investigation of Current Account Solvency in Latin America Using Non Linear Nonstationarity Tests," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, De Gruyter, vol. 8(1), pages 1-19, March.
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Citations

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Cited by:
  1. Blaise Gnimassoun, 2014. "The importance of the exchange rate regime in limiting current account imbalances in sub-Saharan African countries," EconomiX Working Papers 2014-22, University of Paris West - Nanterre la Défense, EconomiX.
  2. Gazi M. Hassan & Mark J. Holmes, 2014. "Do Remittances Facilitate a Sustainable Current Account?," Working Papers in Economics, University of Waikato, Department of Economics 14/07, University of Waikato, Department of Economics.
  3. Gnimassoun, Blaise & Coulibaly, Issiaka, 2014. "Current account sustainability in Sub-Saharan Africa: Does the exchange rate regime matter?," Economic Modelling, Elsevier, Elsevier, vol. 40(C), pages 208-226.
  4. Lanzafame, Matteo, 2012. "Current account sustainability in advanced economies," MPRA Paper 42384, University Library of Munich, Germany.
  5. Christian Schoder & Christian R. Proaño & Willi Semmler, 2012. "Are the current account imbalances between EMU countries sustainable?," IMK Working Paper 90-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  6. Ayla Oğuş Binatli & Niloufer Sohrabji, 2012. "Intertemporal Solvency of Turkey’s Current Account," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(1), pages 89-104, March.
  7. Nikolina E. Kosteletou, 2013. "Financial Integration, Euro and the Twin Deficits of Southern Eurozone Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(2), pages 161-178, April.

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