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The sustainability of trade balances in sub-Saharan Africa: panel cointegration tests with cross-section dependence

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  • Yoshihiro Hashiguchi
  • Shigeyuki Hamori

Abstract

This article investigates the sustainability of trade balances in the sub-Saharan African regions, using both the panel unit root (Im--Pesaran--Shin (IPS)) test proposed by Im et al. (2003) and the cross-sectionally augmented version of the IPS (Pesaran Cross-sectional IPS (CIPS)) test suggested by Pesaran (2007), where the former test is based on the assumption of cross-section independence and the latter actually considers cross-section independence. Although the empirical results based on the IPS test indicate that the balance of trade in the sub-Saharan African regions is sustainable, the empirical results of the CIPS test reveal that it is not sustainable. Since Cross-section Dependence (CD) was recognized using the CD test developed by Pesaran (2004), there is a possibility that the empirical results based on the IPS test are spurious.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 19 (2012)
Issue (Month): 2 (February)
Pages: 161-165

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Handle: RePEc:taf:apeclt:v:19:y:2012:i:2:p:161-165

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  1. Arize, Augustine C., 2002. "Imports and exports in 50 countries: Tests of cointegration and structural breaks," International Review of Economics & Finance, Elsevier, vol. 11(1), pages 101-115, April.
  2. Shigeyuki Hamori, 2009. "The sustainability of trade accounts of the G-7 countries," Applied Economics Letters, Taylor & Francis Journals, vol. 16(17), pages 1691-1694.
  3. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  4. Manuchehr Irandoust & Johan Ericsson, 2004. "Are Imports and Exports Cointegrated? An International Comparison," Metroeconomica, Wiley Blackwell, vol. 55(1), pages 49-64, 02.
  5. Ahmad Zubaidi Baharumshah & Evan Lau, 2002. "On the Sustainability of Current Account Deficits: Evidence from Four ASEAN Countries," Working Papers 0062, National University of Ireland Galway, Department of Economics, revised 2002.
  6. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
  7. Wu, Jyh-Lin, 2000. "Mean reversion of the current account: evidence from the panel data unit-root test," Economics Letters, Elsevier, vol. 66(2), pages 215-222, February.
  8. Paresh Kumar Narayan & Seema Narayan, 2005. "Are exports and imports cointegrated? Evidence from 22 least developed countries," Applied Economics Letters, Taylor & Francis Journals, vol. 12(6), pages 375-378.
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Cited by:
  1. Issiaka Coulibaly & Blaise Gnimassoun, 2013. "Current account sustainability in Sub-Saharan Africa: Does the exchange rate regime matter?," EconomiX Working Papers 2013-42, University of Paris West - Nanterre la Défense, EconomiX.
  2. HASHIGUCHI, Yoshihiro & HAMORI, Shigeyuki, 2010. "Small sample properties of CIPS panel unit root test under conditional and unconditional heteroscedasticity," MPRA Paper 24053, University Library of Munich, Germany.

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