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The Australian Trade Balance and Current Account: a Time Series Perspective

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  • Philip Bodman

Abstract

This paper examines the dynamic relationship between Australian imports and exports in both the short and long-run using recent cointegration and error-correction techniques. The analysis has direct implications over the specification and estimation of Australian import and export functions and resulting elasticity estimates. The paper also addresses the issue of sustainability of persistent current account deficits in the Australian context and provides a test of whether Australia is satisfying its intertemporal (or present value) budget constraint (IBC).

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 11 (1997)
Issue (Month): 2 ()
Pages: 39-57

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Handle: RePEc:taf:intecj:v:11:y:1997:i:2:p:39-57

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References

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  1. Phillips, P C B & Durlauf, S N, 1986. "Multiple Time Series Regression with Integrated Processes," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 473-95, August.
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  3. Bharat Trehan & Carl E. Walsh, 1987. "Common trends, the government's budget constraint, and revenue smoothing," Working Papers in Applied Economic Theory 87-11, Federal Reserve Bank of San Francisco.
  4. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-28, August.
  5. J. D. Pitchford, 1989. "A Sceptical View of Australia's Current Account and Debt Problem," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 22(2), pages 5-14.
  6. Sheffrin, S.M. & Woo, W.T., 1989. "Present Value Tests Of An Intertemporal Model Of The Current Account," Papers 61, California Davis - Institute of Governmental Affairs.
  7. Bharat Trehan & Carl E. Walsh, 1988. "Testing intertemporal budget constraints: theory and applications to U. S. federal budget and current account deficits," Working Papers in Applied Economic Theory 88-03, Federal Reserve Bank of San Francisco.
  8. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-93, January.
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  11. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107.
  12. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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  14. Peter C.B. Phillips, 1985. "Time Series Regression with a Unit Root," Cowles Foundation Discussion Papers 740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
  15. Hamilton, James D & Flavin, Marjorie A, 1986. "On the Limitations of Government Borrowing: A Framework for EmpiricalTesting," American Economic Review, American Economic Association, vol. 76(4), pages 808-19, September.
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  17. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "The intertemporal approach to the current account," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 34, pages 1731-1799 Elsevier.
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  21. James G. MacKinnon, 2010. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
  22. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  23. Banerjee, Anindya, et al, 1986. "Exploring Equilibrium Relationships in Econometrics through Static Models: Some Monte Carlo Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 253-77, August.
  24. Phillips, P. C. B. & Ouliaris, S., 1988. "Testing for cointegration using principal components methods," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 205-230.
  25. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  26. Vredin, Anders & Warne, Anders, 1991. " Current Account and Macroeconomic Fluctuations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(4), pages 511-30.
  27. Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, vol. 55(5), pages 1035-56, September.
  28. Craig S. Hakkio & Mark Rush, 1986. "Co-integration and the government's budget deficit," Research Working Paper 86-12, Federal Reserve Bank of Kansas City.
  29. Forsyth, P.J., 1990. "Competitiveness, Microeconomic Reform And The Current Account Deficit," CEPR Discussion Papers 228, Centre for Economic Policy Research, Research School of Economics, Australian National University.
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Cited by:
  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.

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