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A Reassessment Of Balance Of Payments Constrained Growth: Results From Panel Unit Root And Panel Cointegration Tests

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Author Info
DIMITRIS K. CHRISTOPOULOS
EFTHYMIOS G. TSIONAS
Abstract

The paper reassesses the empirical evidence for Thirlwall's law in seven industrial countries by using panel unit root and panel cointegration tests including Johansen maximum likelihood cointegration tests. Current practice restricts attention to time series residual based cointegration tests, which are known to have low power and are subject to normalization problems. Since economic time series are typically short, it is desirable to exploit panel data in order to draw sharper inferences. The empirical results reveal that imports are cointegrated with terms of trade and income (although residual-based tests indicate the opposite). We find that, with the exception of Australia, Thirlwall's law holds. [C22, C23, O40, O57]

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Article provided by Korean International Economic Association in its journal International Economic Journal.

Volume (Year): 17 (2003)
Issue (Month): 3 (October)
Pages: 39-54
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Handle: RePEc:taf:intecj:v:17:y:2003:i:3:p:39-54

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  4. Bairam, Erkin I, 1993. "Static versus Dynamic Specifications and the Harrod Foreign Trade Multiplier," Applied Economics, Taylor and Francis Journals, vol. 25(6), pages 739-42, June.
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  6. Harris, R. & Tzavalis, E., 1996. "Inference for Unit Roots in Dynamic Panels," Discussion Papers 96/04, University of Exeter, School of Business and Economics.
  7. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I. [Downloadable!] (restricted)
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  10. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178. [Downloadable!] (restricted)
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  11. 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.
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  12. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
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  1. Ricardo Azevedo Araujo & Gilberto Tadeu Lima, 2006. "A Structural Economic Dynamics Approach To Balance-Of-Payments-Constrained Growth," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 119, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
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