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Current Account Deficits in the Transition Economies

  • Mark J. Holmes

This study tests for the stationarity and sustainability of current account deficits for ten transition economies. For this purpose, a new test is employed that allows one to test for unit roots in heterogeneous panel datasets. While the benefits from creating a panel to overcome low test power are well known, this test also offers key advantages over existing alternative panel data unit root tests: it is able to identify which members within the panel are responsible for rejecting the null hypothesis of joint non-stationarity. In addition, the SURADF test does not presume disturbances that are independently and identically distributed. Using data covering 1993 - 2001, this study finds strong evidence in favour of current account mean-reversion for six countries. Of the six countries in the sample that joined the European Union in May 2004, non-stationarity was confirmed in the case of Lithuania only.

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Article provided by University of Economics, Prague in its journal Prague Economic Papers.

Volume (Year): 2004 (2004)
Issue (Month): 4 ()
Pages: 347-358

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Handle: RePEc:prg:jnlpep:v:2004:y:2004:i:4:id:247:p:347-358
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