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The trade balance in euro countries: a natural case study of periodic integration with a changing mean

  • Tomas del Barrio Castro

    (University of the Balearic Islands)

  • Mariam Camarero

    (Universitat Jaume I)

  • Cecilio Tamarit

    (University of Valencia)

External imbalances in the eurozone have become an issue of increased interest as an indicator of overall macroeconomic disequilibria. We focus on the euro-area countries with data available that has not been seasonally adjusted: Finland, France, the Netherlands, Italy and Spain. We use periodic integration and cointegration to deal with the seasonality and nonstationarity present in the time series and to analyze the long-run relationship between exports and imports. We nd a clear change in the mean in all the countries that can be associated with the creation of the euro. Hence we extend the test of periodic integration proposed by Boswijk and Franses (1996) allowing for a change in the mean. Finally we conclude that we nd a long-run relationship for the majority of the countries.

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File URL: ftp://147.156.210.157/RePEc/pdf/eec_1321.pdf
File Function: First version, 2013
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Paper provided by Department of Applied Economics II, Universidad de Valencia in its series Working Papers with number 1321.

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Length: 31 pages
Date of creation: Nov 2013
Date of revision:
Handle: RePEc:eec:wpaper:1321
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  1. Pierre-Olivier Gourinchas & Hélène Rey, 2007. "International Financial Adjustment," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 665-703, 08.
  2. Reuven Glick & Kenneth Rogoff, 1992. "Global versus country-specific productivity shocks and the current account," Working Papers in Applied Economic Theory 92-06, Federal Reserve Bank of San Francisco.
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  4. Perron, P., 1989. "Testing For A Unit Root In A Time Series With A Changing Mean," Papers 347, Princeton, Department of Economics - Econometric Research Program.
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  8. Gregory, A.W. & Hansen, B.E., 1992. "Residual-Based Tests for Cointegration in Models with Regime Shifts," RCER Working Papers 335, University of Rochester - Center for Economic Research (RCER).
  9. Boswijk, H Peter & Franses, Philip Hans, 1995. "Periodic Cointegration: Representation and Inference," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 436-54, August.
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  11. Paulo M.M. Rodrigues & A.M. Robert Taylor, . "Efficient Tests of the Seasonal Unit Root Hypothesis," Discussion Papers 06/12, University of Nottingham, School of Economics.
  12. Tomas del Barrio Castro & Mariam Camarero & Cecilio Tamarit, 2013. "An analysis of the trade balance for OECD countries using periodic integration and cointegration," Working Papers 1320, Department of Applied Economics II, Universidad de Valencia.
  13. Paresh Kumar Narayan & Seema Narayan, 2005. "Are exports and imports cointegrated? Evidence from 22 least developed countries," Applied Economics Letters, Taylor & Francis Journals, vol. 12(6), pages 375-378.
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  26. Sargan, John Denis & Bhargava, Alok, 1983. "Testing Residuals from Least Squares Regression for Being Generated by the Gaussian Random Walk," Econometrica, Econometric Society, vol. 51(1), pages 153-74, January.
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