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An Empirical Analysis Of Sustainability Of Trade Deficit: Evidence From Sri Lanka

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Author Info
PERERA, Nelson ()
VARMA, Reetu
Abstract

In this paper, the long-run relationship between Sri Lankan exports and imports during the period 1950 to 2006 is examined using unit root tests and cointegration techniques that allow for an endogenously determined structural break. The results failed to support the existence of a long-run equilibrium between exports and imports in Sri Lanka. This finding questions the effectiveness of Sri Lanka’s current long-term macroeconomic policies and suggests that Sri Lanka is in violation of its international budget constraint.

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Publisher Info
Article provided by Euro-American Association of Economic Development in its journal International Journal of Applied Econometrics and Quantitative Studies .

Volume (Year): 5 (2008)
Issue (Month): 1 ()
Pages: 79-92
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Handle: RePEc:eaa:ijaeqs:v:5:y2008:i:1_6

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Related research
Keywords: Trade Deficit; Unit root; Structural Breaks; Cointegration; Sri Lanka;

Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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  1. Manuchehr Irandoust & Johan Ericsson, 2004. "Are Imports and Exports Cointegrated? An International Comparison," Metroeconomica, Blackwell Publishing, vol. 55(1), pages 49-64, 02. [Downloadable!] (restricted)
  2. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May. [Downloadable!] (restricted)
  3. Hakkio, Craig S & Rush, Mark, 1991. "Is the Budget Deficit "Too Large?"," Economic Inquiry, Oxford University Press, vol. 29(3), pages 429-45, July.
  4. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November. [Downloadable!] (restricted)
    Other versions:
  5. Mohsen Bahmani-Oskooee & Hyun-Jae Rhee, 1997. "Are Imports And Exports Of Korea Cointegrated?," International Economic Journal, Korean International Economic Association, vol. 11(1), pages 109-114, April. [Downloadable!] (restricted)
  6. Stilianos Fountas & Jyh-Lin Wu, 1999. "Are The U.S. Current Account Deficits Really Sustainable?," International Economic Journal, Korean International Economic Association, vol. 13(3), pages 51-58, October. [Downloadable!] (restricted)
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  7. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-70, July.
    Other versions:
  8. Gregory, Allan W & Hansen, Bruce E, 1996. "Tests for Cointegration in Models with Regime and Trend Shifts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 555-60, August.
  9. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October. [Downloadable!] (restricted)
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  10. Dierk Herzer & Felicitas Nowak-Lehmann D., 2006. "Is there a long-run relationship between exports and imports in Chile?," Applied Economics Letters, Taylor and Francis Journals, vol. 13(15), pages 981-986, December. [Downloadable!] (restricted)
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This page was last updated on 2009-12-5.

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