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Cointegration And Asymmetric Adjustment: Some New Evidence Concerning The Behaviour Of The Us Current Account

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  • Mark J. Holmes

    (Waikato University Management School, New Zealand)

  • Theodore Panagiotidis

    (University of Macedonia, Greece and The Rimini Center for Economic Analysis, Italy)

Abstract

imports and exports and asymmetries in the adjustment of the US current account over the study period 1960Q4-2007Q2. We find evidence in favour of cointegration through the application of the standard Johansen methodology. Employing the Trace test procedure recursively, two distinct regimes are identified according to whether or not imports and exports are cointegrated. We also consider the Breitung (2002) and Breitung and Taylor (2003) nonparametric cointegration test procedures that do not assume linear short-run dynamics. Further analysis of the asymmetric short-run dynamics reveals that adjustment towards long-run equilibrium is primarily driven by US exports responding to current account deficits.

Suggested Citation

  • Mark J. Holmes & Theodore Panagiotidis, 2009. "Cointegration And Asymmetric Adjustment: Some New Evidence Concerning The Behaviour Of The Us Current Account," Working Paper series 16_09, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:16_09
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    10. Andrea Civelli, 2016. "Excess Returns, Average Returns and the Adjustment Mechanism of the External Position of a Country," Review of International Economics, Wiley Blackwell, vol. 24(2), pages 226-252, May.
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    More about this item

    Keywords

    US Current Account; Sustainability; Cointegration; structural changes; nonparametric cointegration; recursive Trace test statistic; recursive betas; asymmetric error correction;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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