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      How sustainable are OECD current account balances in the long run?

      Holmes, Mark J.
      DOI
       10.1111/j.1467-9957.2006.00514.x
      Link
       www3.interscience.wiley.com
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      Citation
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      Holmes, M. (2006). How sustainable are OECD current account balances in the long run? The Manchester School, 74(5), 626-643.
      Permanent Research Commons link: https://hdl.handle.net/10289/1868
      Abstract
      The study examines the long-run sustainability of OECD current account balances. For this purpose, tests for current account stationarity and then cointegration between exports and imports are based on recently developed panel data methods that offer increased power over existing time-series techniques. Unlike existing panel studies on this topic, this study utilizes techniques that enable the examination of sustainability for individual panel members. The first stage of the investigation relies on a novel approach to unit root testing whereby tests for stationarity are conducted within a seemingly unrelated regression framework. The second stage involves the estimation of the long-run relationship between exports and imports by a range of recently developed panel data techniques advocated by Pedroni. Using a panel of 11 OECD countries, the results from these techniques suggest that sustainability is present in six countries at most. Also, sustainability is generally a characteristic of the non-Euro countries. These results can be contrasted with existing group mean unit root and cointegration tests that indicate sustainability for the group as a whole.
      Date
      2006
      Type
      Journal Article
      Publisher
      Blackwell Publishing
      Collections
      • Management Papers [1101]
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