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A Reassessment Of Balance Of Payments Constrained Growth: Results From Panel Unit Root And Panel Cointegration Tests

Author Info

Listed author(s):
  • Dimitris Christopoulos
  • EFthymios Tsionas

Abstract

The paper reassesses the empirical evidence for Thirlwall's law in seven industrial countries by using panel unit root and panel cointegration tests including Johansen maximum likelihood cointegration tests. Current practice restricts attention to time series residual based cointegration tests, which are known to have low power and are subject to normalization problems. Since economic time series are typically short, it is desirable to exploit panel data in order to draw sharper inferences. The empirical results reveal that imports are cointegrated with terms of trade and income (although residual-based tests indicate the opposite). We find that, with the exception of Australia, Thirlwall's law holds. [C22, C23, O40, O57]

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File URL: http://www.tandfonline.com/doi/abs/10.1080/10168730300000003
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Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 17 (2003)
Issue (Month): 3 ()
Pages: 39-54

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Handle: RePEc:taf:intecj:v:17:y:2003:i:3:p:39-54
DOI: 10.1080/10168730300000003
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  1. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
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  3. Hubert Hieke, 1997. "Balance-of-Payments-Constrained Growth: A Reconsideration of the Evidence for the U.S. Economy," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 19(3), pages 313-325, April.
  4. Anthony P. Thirlwall, 2011. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," PSL Quarterly Review, Economia civile, vol. 64(259), pages 429-438.
  5. Pierse, R. G. & Snell, A. J., 1995. "Temporal aggregation and the power of tests for a unit root," Journal of Econometrics, Elsevier, vol. 65(2), pages 333-345, February.
  6. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
  7. Peter Pedroni, 2000. "Fully Modified OLS for Heterogeneous Cointegrated Panels," Department of Economics Working Papers 2000-03, Department of Economics, Williams College.
  8. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  9. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-652, Special I.
  10. Harris, Richard D. F. & Tzavalis, Elias, 1999. "Inference for unit roots in dynamic panels where the time dimension is fixed," Journal of Econometrics, Elsevier, vol. 91(2), pages 201-226, August.
  11. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October.
  12. O'Connell, Paul G. J., 1998. "The overvaluation of purchasing power parity," Journal of International Economics, Elsevier, vol. 44(1), pages 1-19, February.
  13. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  14. José A. Alonso & Carlos Garcimartín, 1999. "A New Approach to Balance-of-Payments Constraint: Some Empirical Evidence," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 21(2), pages 259-282, January.
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Cited by:

  1. Polemis, Michael L. & Fotis, Panagiotis N., 2014. "The taxation effect on gasoline price asymmetry nexus: Evidence from both sides of the Atlantic," Energy Policy, Elsevier, vol. 73(C), pages 225-233.
  2. Irene Fafaliou & Michael Polemis, 2013. "Competitiveness of the Euro Zone Manufacturing: A Panel Data Analysis," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 19(1), pages 45-61, February.
  3. Maja Kadievska-Vojnovic & Danica Unevska, 2007. "Price and Income Elasticities of Export and Import and Economic Growth in the case of the Republic of Macedonia," Working Papers 2007-01, National Bank of the Republic of Macedonia.
  4. Polemis, Michail & Fotis, Panagiotis, 2011. "The gasoline Industry in European Union and the USA," MPRA Paper 35097, University Library of Munich, Germany.
  5. Polemis, Michael L., 2016. "New evidence on the impact of structural reforms on electricity sector performance," Energy Policy, Elsevier, vol. 92(C), pages 420-431.
  6. Ricardo Azevedo Araujo & Gilberto Tadeu Lima, 2007. "A structural economic dynamics approach to balance-of-payments-constrained growth," Cambridge Journal of Economics, Oxford University Press, vol. 31(5), pages 755-774, September.
  7. Polemis, Michael L. & Fotis, Panagiotis N., 2013. "Do gasoline prices respond asymmetrically in the euro zone area? Evidence from cointegrated panel data analysis," Energy Policy, Elsevier, vol. 56(C), pages 425-433.
  8. A. P. Thirlwall, 2013. "Economic Growth in an Open Developing Economy," Books, Edward Elgar Publishing, number 15208.
  9. Hsiao, Frank S.T. & Hsiao, Mei-Chu W., 2006. "FDI, exports, and GDP in East and Southeast Asia--Panel data versus time-series causality analyses," Journal of Asian Economics, Elsevier, vol. 17(6), pages 1082-1106, December.
  10. Gouvea, Raphael Rocha & Lima, Gilberto Tadeu, 2011. "Balance-of-payments-constrained growth in a multisectoral framework: a panel data investigation," MPRA Paper 29816, University Library of Munich, Germany.
  11. repec:kap:iaecre:v:19:y:2013:i:1:p:45-61 is not listed on IDEAS
  12. Anthony P. Thirlwall, 2011. "Balance of payments constrained growth models: history and overview," PSL Quarterly Review, Economia civile, vol. 64(259), pages 307-351.
  13. Hsiao, Frank S. T. & Hsiao, Mei-Chu W., 2004. "The chaotic attractor of foreign direct investment--Why China?: A panel data analysis," Journal of Asian Economics, Elsevier, vol. 15(4), pages 641-670, August.

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