IDEAS home Printed from https://ideas.repec.org/p/shf/wpaper/2012011.html
   My bibliography  Save this paper

A Note on the Current Account Sustainability of European Transition Economies

Author

Listed:
  • Juan Carlos Cuestas

    () (Department of Economics, The University of Sheffield)

Abstract

This paper analyses the sustainability of the current accounts of a group of Central and Eastern European countries. Given the link between national savings (public and private) and investment, current account may yield stabilities in the former fundamental macroeconomic variables. Hence, this analysis is of paramount importance given the 2008-2011 debt crises faced by many European economies, and the addition of new EU countries to the EMU. By means of unit root tests and fractional integration it shows that, in general, the ratio of current account to gross domestic product is a stationary and mean reverting process, although in some cases shocks tend to have long lasting effects, implying that there is no evidence of a potential debt default in this group of countries.

Suggested Citation

  • Juan Carlos Cuestas, 2012. "A Note on the Current Account Sustainability of European Transition Economies," Working Papers 2012011, The University of Sheffield, Department of Economics.
    • Handle: RePEc:shf:wpaper:2012011
    as

    Download full text from publisher

    File URL: http://www.shef.ac.uk/economics/research/serps/articles/2012_011.html
    File Function: First version, 2012
    Download Restriction: no

    References listed on IDEAS

    as
    1. Mark J. Holmes, 2004. "Current Account Deficits in the Transition Economies," Prague Economic Papers, University of Economics, Prague, vol. 2004(4), pages 347-358.
    2. Kaddour Hadri, 2000. "Testing for stationarity in heterogeneous panel data," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 148-161.
    3. Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
    4. Gourieroux,Christian & Monfort,Alain, 1997. "Time Series and Dynamic Models," Cambridge Books, Cambridge University Press, number 9780521423083.
    5. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    6. Coakley, Jerry & Kulasi, Farida & Smith, Ron, 1996. "Current Account Solvency and the Feldstein-Horioka Puzzle," Economic Journal, Royal Economic Society, vol. 106(436), pages 620-627, May.
    7. Husted, Steven, 1992. "The Emerging U.S. Current Account Deficit in the 1980s: A Cointegration Analysis," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 159-166, February.
    8. Perron, Pierre & Rodriguez, Gabriel, 2003. "GLS detrending, efficient unit root tests and structural change," Journal of Econometrics, Elsevier, vol. 115(1), pages 1-27, July.
    9. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
    10. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
    11. Kapetanios, George & Shin, Yongcheol & Snell, Andy, 2003. "Testing for a unit root in the nonlinear STAR framework," Journal of Econometrics, Elsevier, vol. 112(2), pages 359-379, February.
    12. 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.
    13. Granger, C. W. J., 1980. "Long memory relationships and the aggregation of dynamic models," Journal of Econometrics, Elsevier, vol. 14(2), pages 227-238, October.
    14. Bohn, Henning, 2007. "Are stationarity and cointegration restrictions really necessary for the intertemporal budget constraint?," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1837-1847, October.
    15. Taylor, Alan M., 2002. "A century of current account dynamics," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 725-748, November.
    16. Sollis, Robert, 2009. "A simple unit root test against asymmetric STAR nonlinearity with an application to real exchange rates in Nordic countries," Economic Modelling, Elsevier, vol. 26(1), pages 118-125, January.
    17. Gil-Alana, L. A. & Robinson, P. M., 1997. "Testing of unit root and other nonstationary hypotheses in macroeconomic time series," Journal of Econometrics, Elsevier, vol. 80(2), pages 241-268, October.
    18. Stein, Jerome L., 2007. "United States current account deficits: A stochastic optimal control analysis," Journal of Banking & Finance, Elsevier, vol. 31(5), pages 1321-1350, May.
    19. Aristovnik, Aleksander, 2006. "How sustainable are current account deficits in selected transition economies?," MPRA Paper 485, University Library of Munich, Germany.
    20. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
    21. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    22. 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.
    23. Alok Bhargava, 1986. "On the Theory of Testing for Unit Roots in Observed Time Series," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 369-384.
    24. Juncal Cunado & Luis A Gil-Alana & Fernando Pérez de Gracia, 2010. "European Current Account Sustainability: New Evidence Based On Unit Roots and Fractional Integration," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 36(2), pages 177-187, Spring.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    unit roots; fractional integration; current account; EU;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:shf:wpaper:2012011. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jacob Holmes). General contact details of provider: http://edirc.repec.org/data/desheuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.