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Current account sustainability in advanced economies

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  • Lanzafame, Matteo

Abstract

This paper investigates the sustainability of current accounts in advanced economies, using a panel of 27 countries and annual data over the 1980-2008 period. We find strong evidence in favour of nonlinear but stationary current-account trajectories for 14 countries, while the remaining 13 appear to be nonstationary and, thus, unsustainable. Our analysis indicates that careful empirical modeling of current-account dynamics, particularly in relation to cross-section dependence and nonlinear behaviour, is crucial for appropriate economic policymaking.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42384.

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Date of creation: 01 Nov 2012
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Handle: RePEc:pra:mprapa:42384

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Keywords: Current account sustainability; panel unit root tests; nonlinearity;

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  16. Freund, Caroline, 2005. "Current account adjustment in industrial countries," Journal of International Money and Finance, Elsevier, Elsevier, vol. 24(8), pages 1278-1298, December.
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