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International Intertemporal Solvency in OECD Countries: Evidence from Panel Unit Root

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  • Huseyin Kalyoncu

Abstract

The purpose of this study is to investigate the sustainability of current account of 22 OECD countries by employing Liu and Tanner (1996) testing procedure. The procedure used here is to examine stationarity of current account. By using ADF unit root test on single time series, it has been found that current account of most OECD countries have unit root. This outcome, however, might be due to the generally low power of this test. The aim of this paper is to reconsider this issue by exploiting the extra information provided by the combination of the time-series and cross-sectional data and the subsequent power advantages of panel data unit root tests. We apply the test advocated by Im, Pesaran and Shin (1997). According to estimation, current account deficits in OECD countries are sustainable.

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Bibliographic Info

Article provided by University of Economics, Prague in its journal Prague Economic Papers.

Volume (Year): 2006 (2006)
Issue (Month): 1 ()
Pages: 44-49

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Handle: RePEc:prg:jnlpep:v:2006:y:2006:i:1:id:275:p:44-49

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Keywords: solvency; panel data unit-root test; current account;

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References

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Cited by:
  1. Shyh-Wei Chen, 2010. "Testing for the Sustainability of the Current Account Deficit in Four Industrial Countries: A Revisitation," Economics Bulletin, AccessEcon, vol. 30(2), pages 1474-1495.
  2. Chih-kai Chang & Tsangyao Chang, 2012. "Revisiting the sustainability of current account deficit: SPSM using the panel KSS Test with a Fourier Function," Economics Bulletin, AccessEcon, vol. 32(1), pages 538-550.
  3. Chen, Shyh-Wei, 2011. "Current account deficits and sustainability: Evidence from the OECD countries," Economic Modelling, Elsevier, vol. 28(4), pages 1455-1464, July.

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