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On The Sustainability of the EU’s Current Account Deficits

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Author Info
Mark J. Holmes () (Dept of Economics, Waikato University)
Jesus Otero () (Facultad de Economia, Universidad del Rosario)
Theodore Panagiotidis () (Department of Economics, Loughborough University)

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Abstract

In this paper, we test for the stationarity of EU current account deficits. Our testing strategy addresses two key concerns with regard to unit root panel data testing, namely (i) the identification of which members-states are stationary, and (ii) the presence of cross-sectional dependence. For this purpose, we employ a moving block bootstrap approach to the Hadri (2000) test. While there is evidence that current account sustainability applies to panels comprising EU members, this is not the case when non-EU economies are considered.

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File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/EU_sustanability.pdf
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Publisher Info
Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2007_6.

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Date of creation: Feb 2007
Date of revision: Feb 2007
Handle: RePEc:lbo:lbowps:2007_6

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Related research
Keywords: Heterogeneous dynamic panels; current account sustainability; mean reversion; panel stationarity test.;

Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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