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Cointegration and Asymmetric Adjustment: Some New Evidence Concerning the Behavior of the U.S. Current Account

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Author Info
Mark J. Holmes (Waikato University)
Theodore Panagiotidis (University of Macedonia)

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Abstract

This study conducts an investigation into the extent of cointegration between imports and exports and asymmetries in the adjustment of the U.S. current account over the study period 1960Q4-2007Q2. We find evidence in favor of cointegration through the application of the standard Johansen methodology. Employing the Trace test procedure recursively, two distinct regimes are identified according to whether or not imports and exports are cointegrated. We also consider the Breitung (2002) and Breitung and Taylor (2003) nonparametric cointegration test procedures that do not assume linear short-run dynamics. Further analysis of the asymmetric short-run dynamics reveals that adjustment towards long-run equilibrium is primarily driven by U.S. exports responding to current account deficits.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 9 (2009)
Issue (Month): 1 ()
Pages:
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Handle: RePEc:bpj:bejmac:v:9:y:2009:i:1:n:23

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Web page: http://www.bepress.com/bejm

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Related research
Keywords: U.S. current account; sustainability; cointegration; structural changes; nonparametric cointegration; recursive Trace test statistic; recursive betas; asymmetric error correction;

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Find related papers by JEL classification:
C5 - Mathematical and Quantitative Methods - - Econometric Modeling
F1 - International Economics - - Trade
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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