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On The Sustainability of the EU’s Current Account Deficits

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Abstract

In this paper, we test for the stationarity of EU current account deficits. Our testing strategy addresses two key concerns with regard to unit root panel data testing, namely (i) the identification of which members-states are stationary, and (ii) the presence of cross-sectional dependence. For this purpose, we employ a moving block bootstrap approach to the Hadri (2000) test. While there is evidence that current account sustainability applies to panels comprising EU members, this is not the case when non-EU economies are considered.

Suggested Citation

  • Mark J. Holmes & Jesus Otero & Theodore Panagiotidis, 2007. "On The Sustainability of the EU’s Current Account Deficits," Discussion Paper Series 2007_6, Department of Economics, Loughborough University, revised Feb 2007.
    • Handle: RePEc:lbo:lbowps:2007_6
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    File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/EU_sustanability.pdf
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    More about this item

    Keywords

    Heterogeneous dynamic panels; current account sustainability; mean reversion; panel stationarity test.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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