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Are the U.S. Current Account Deficits Really Sustainable?

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  • Fountas Stilianos
  • Wu Jyh-Lin

Abstract

We have tested for a long-run relationship between four U.S. Export measures and analogous import measures (measured in nominal and real terms, levels and deflated by GNP) in the 1967-1994 period using quarterly data. Using various econometric tests that include standard Engle-Granger cointegration tests and two tests that allow for test-determined breaks in the cointegrating relationship, we have shown that the hypothesis of no long-run relationship between exports and imports cannot be rejected. This finding contrasts sharply with earlier literature and carries the important policy implication that US current account deficits are not sustainable. [F30]

Suggested Citation

  • Fountas Stilianos & Wu Jyh-Lin, 1999. "Are the U.S. Current Account Deficits Really Sustainable?," International Economic Journal, Taylor & Francis Journals, vol. 13(3), pages 51-58.
  • Handle: RePEc:taf:intecj:v:13:y:1999:i:3:p:51-58 DOI: 10.1080/10168739900000004
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    1. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    2. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, pages 277-301.
    3. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, pages 99-126.
    4. Gregory, Allan W. & Hansen, Bruce E., 1996. "Residual-based tests for cointegration in models with regime shifts," Journal of Econometrics, Elsevier, pages 99-126.
    5. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, pages 277-301.
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