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A new approach to examining the sustainability of external imbalances: the case of Japan

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  • Tuck Cheong Tang

Abstract

This study aims to solve the puzzle of the conventional practice of examining the sustainability of external accounts by initially looking for cointegration between imports and exports. This study proposes a new approach to examine this thesis using unit root tests (with unknown break date) on trade balance series rather than testing the cointegration relationships between imports and exports. In contrast to previous findings, this study has shown empirically that Japan's trade balances are unsustainable. This finding has important policy implications for Japan's external accounts.

Suggested Citation

  • Tuck Cheong Tang, 2006. "A new approach to examining the sustainability of external imbalances: the case of Japan," Applied Economics Letters, Taylor & Francis Journals, vol. 13(5), pages 287-292.
  • Handle: RePEc:taf:apeclt:v:13:y:2006:i:5:p:287-292
    DOI: 10.1080/13504850500378726
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    Cited by:

    1. Mark Holmes & Theodore Panagiotidis & Abhijit Sharma, 2011. "The sustainability of India's current account," Applied Economics, Taylor & Francis Journals, vol. 43(2), pages 219-229.
    2. Dumitriu, Ramona & Stefanescu, Răzvan, 2013. "Romanian current account sustainability after the adhesion to European Union," MPRA Paper 51244, University Library of Munich, Germany, revised 05 Apr 2013.
    3. Ayla Oğuş Binatli & Niloufer Sohrabji, 2012. "Intertemporal Solvency of Turkey’s Current Account," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(1), pages 89-104, March.
    4. Arize, Augustine C. & BAHMANI-OSKOOEE, Mohsen, 2017. "Do Imports and Exports Adjust Nonlinearly? Evidence from 100 Countries," MPRA Paper 82807, University Library of Munich, Germany.
    5. repec:pid:journl:v:55:y:2016:i:4:p:397-419 is not listed on IDEAS

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