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Cointegration And Asymmetric Adjustment: Some New Evidence Concerning The Behaviour Of The Us Current Account

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Author Info
Mark J. Holmes () (Waikato University Management School, New Zealand)
Theodore Panagiotidis () (University of Macedonia, Greece and The Rimini Center for Economic Analysis, Italy)

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Abstract

imports and exports and asymmetries in the adjustment of the US current account over the study period 1960Q4-2007Q2. We find evidence in favour of cointegration through the application of the standard Johansen methodology. Employing the Trace test procedure recursively, two distinct regimes are identified according to whether or not imports and exports are cointegrated. We also consider the Breitung (2002) and Breitung and Taylor (2003) nonparametric cointegration test procedures that do not assume linear short-run dynamics. Further analysis of the asymmetric short-run dynamics reveals that adjustment towards long-run equilibrium is primarily driven by US exports responding to current account deficits.

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Paper provided by Rimini Centre for Economic Analysis in its series Working Paper Series with number 16-09.

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Date of creation: Jan 2009
Date of revision: Jan 2009
Handle: RePEc:rim:rimwps:16-09

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Related research
Keywords: US Current Account; Sustainability; Cointegration; structural changes; nonparametric cointegration; recursive Trace test statistic; recursive betas; asymmetric error correction.;

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Find related papers by JEL classification:
C5 - Mathematical and Quantitative Methods - - Econometric Modeling
F1 - International Economics - - Trade
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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