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European Current Account Sustainability: New Evidence Based On Unit Roots and Fractional Integration

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  • Juncal Cunado

    (Department of Quantitative Methods, Universidad de Navarra, Campus Universitario, 31080 Pamplona, Spain)

  • Luis A Gil-Alana

    (Department of Quantitative Methods, Universidad de Navarra, Campus Universitario, 31080 Pamplona, Spain)

  • Fernando Pérez de Gracia

    (Department of Economics, Universidad de Navarra, 31080, Pamplona, Campus Universitario, 31080 Pamplona, Spain)

Abstract

In this paper we examine current account sustainability for some European countries. However, instead of using classic approaches based on standard I(0)/I(1) procedures, we use other more recent techniques for unit roots along with fractionally integrated methods. Our findings can be summarized as follows: according to the Ng and Perron's (2001) procedure, exports and imports are non-stationary I(1) variables in most of the countries. However, using fractional methods, exports and imports are in most cases I(d) with d>1. With respect to the current accounts, the orders of integration are generally smaller than in the cases of exports and imports, in some cases even smaller than 1, though the unit root cannot be rejected in the majority of the countries. Therefore, we obtain little or no evidence of current account sustainability in the European countries examined.

Suggested Citation

  • Juncal Cunado & Luis A Gil-Alana & Fernando Pérez de Gracia, 2010. "European Current Account Sustainability: New Evidence Based On Unit Roots and Fractional Integration," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 36(2), pages 177-187, Spring.
  • Handle: RePEc:pal:easeco:v:36:y:2010:i:2:p:177-187
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    Citations

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    Cited by:

    1. Juan Carlos Cuestas, 2016. "Changes in sovereign debt dynamics in Central and Eastern Europe," Working Papers 16-10, Asociación Española de Economía y Finanzas Internacionales.
    2. Juan Carlos Cuestas, 2012. "A Note on the Current Account Sustainability of European Transition Economies," Working Papers 2012011, The University of Sheffield, Department of Economics.
    3. Juan Carlos Cuestas & Luis A. Gil-Alana & Paulo José Regis, 2015. "The Sustainability of European External Debt: What have We Learned?," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 445-468, August.
    4. Christophe André & Tsangyao Chang & Luis A. Gil-Alana & Rangan Gupta, 2017. "Current Account Sustainability in G7 and BRICS: Evidence from a Long Memory Model with Structural Breaks," Working Papers 201705, University of Pretoria, Department of Economics.
    5. Juan Carlos Cuestas & Luis A. Gil-Alana & Paolo Jose Regis, 2014. "On the changes in the sustainability of European external debt: what have we learned," Bank of Estonia Working Papers wp2014-3, Bank of Estonia, revised 10 Oct 2014.

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