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Mean reversion in the current account of forty-eight african countries: Evidence from the Panel SURADF test

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  • Chu, Hsiao-Ping
  • Chang, Tsangyao
  • Chang, Hsu-Ling
  • Su, Chi-Wei
  • Yuan, Young

Abstract

Here, the Panel seemingly unrelated regressions augmented Dickey–Fuller test (SURADF) test, first introduced and advanced by Breuer et al. [Misleading inferences from panel unit-root tests with an illustration from purchasing power parity, Rev. Int. Econ. 9(3) (2001) 482–493], is used to investigate the mean-reverting behavior of the current account of 48 African countries during the 1980–2004 periods. The empirical results from numerous panel-based unit root tests, conducted earlier, indicated that the current account of each of these countries is stationary; however, when Breuer et al.'s (2001) Panel SURADF test is conducted, it is found that a unit root exists in the current account of 11 of the countries studied. These results have one extremely important policy implication for the 48 African countries studied: the current account deficit of most is sustainable, and thus signifying that those nations should have no incentive to default on their international debt.

Suggested Citation

  • Chu, Hsiao-Ping & Chang, Tsangyao & Chang, Hsu-Ling & Su, Chi-Wei & Yuan, Young, 2007. "Mean reversion in the current account of forty-eight african countries: Evidence from the Panel SURADF test," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 384(2), pages 485-492.
  • Handle: RePEc:eee:phsmap:v:384:y:2007:i:2:p:485-492
    DOI: 10.1016/j.physa.2007.05.051
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    Cited by:

    1. Chen, Shyh-Wei, 2011. "Are current account deficits really sustainable in the G-7 countries?," Japan and the World Economy, Elsevier, vol. 23(3), pages 190-201.
    2. Chen, Shyh-Wei, 2011. "Current account deficits and sustainability: Evidence from the OECD countries," Economic Modelling, Elsevier, vol. 28(4), pages 1455-1464, July.
    3. Yanli LI, Hongfeng PENG & Hongfeng PENG, 2013. "Inflation Persistence in Nine Latin American Countries: Panel SURKSS Test with a Fourier Function," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 132-143, October.
    4. Gnimassoun, Blaise & Coulibaly, Issiaka, 2014. "Current account sustainability in Sub-Saharan Africa: Does the exchange rate regime matter?," Economic Modelling, Elsevier, vol. 40(C), pages 208-226.
    5. Nurgun Topalli & İbrahim Dogan, 2016. "The structure and sustainability of current account deficit: Turkish evidence from regime switching," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(4), pages 570-589, June.
    6. Chih-kai Chang & Tsangyao Chang, 2012. "Revisiting the sustainability of current account deficit: SPSM using the panel KSS Test with a Fourier Function," Economics Bulletin, AccessEcon, vol. 32(1), pages 538-550.
    7. Shyh-Wei Chen, 2010. "Testing for the Sustainability of the Current Account Deficit in Four Industrial Countries: A Revisitation," Economics Bulletin, AccessEcon, vol. 30(2), pages 1474-1495.
    8. Ahmad Zubaidi Baharumshah & Evan Lau, 2010. "Mean Reversion Of The Fiscal Conduct In 24 Developing Countries," Manchester School, University of Manchester, vol. 78(4), pages 302-325, July.
    9. Sáez, Antonio José & Prieto, Faustino & Sarabia, José María, 2012. "A two-tail version of the PPS distribution with application to current account balance data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(21), pages 5160-5171.
    10. Tuck Cheong Tang & Evan Lau, 2008. "An Empirical Investigation On The Sustainability Of Balancing Item Of Balance Of Payment Accounts For Oic Member Countries," Monash Economics Working Papers 31/08, Monash University, Department of Economics.

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