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On the Stationarity of Current Account Deficits in the European Union

  • Mark J. Holmes
  • Jes�s Otero
  • Theodore Panagiotidis

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 panel members are stationary, and (ii) the presence of cross-sectional dependence. For this purpose, we employ an AR-based bootstrap approach to the Hadri (2000 ) test. While there is only mixed evidence that current account stationarity applies when examining individual countries, this does not appear to be the case when considering panels comprising both EU and non-EU members. Copyright � 2010 Blackwell Publishing Ltd.

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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 18 (2010)
Issue (Month): 4 (09)
Pages: 730-740

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Handle: RePEc:bla:reviec:v:18:y:2010:i:4:p:730-740
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  1. Trehan, Bharat & Walsh, Carl E., 1988. "Common trends, the government's budget constraint, and revenue smoothing," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 425-444.
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  12. 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.
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  17. Giulietti, Monica & Otero, Jesus & Smith, Jeremy, 2006. "Testing for stationarity in heterogeneous panel data in the presence of cross section dependence," The Warwick Economics Research Paper Series (TWERPS) 758, University of Warwick, Department of Economics.
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