Current account sustainability in advanced economies

Abstract

This paper investigates the sustainability of current accounts in advanced economies, using a panel of 27 countries and annual data over the 1980-2008 period. We find strong evidence in favour of nonlinear but stationary current-account trajectories for 14 countries, while the remaining 13 appear to be nonstationary and, thus, unsustainable. Our analysis indicates that careful empirical modeling of current-account dynamics, particularly in relation to crosssection dependence and nonlinear behaviour, is crucial for appropriate economic policymaking. JEL classification: C33

Current Account Deficits and Sustainability in Africa: Evidence from Cointegration Approach

“…For instance, a number of studies have examined the sustainability of current account at the individual country level (see Husted, 1992;Apergis et al, 2000;Clarida, 2006;Aizenman and Sun, 2010;Christopoulos and León-Ledesma, 2010;Karunaratne, 2010;Ventosa-Santaulauria et al, 2013;Ndoricimpa et al, 2014;Rinaldi et al, 2014;Tiwari, 2015). Other authors have done similar studies for a group of countries (see Roubini and Wachtel, 1999;Baharumshah et al, 2005;Kim et al, 2009;Chen, 2011;Chang et al, 2012;Donoso and Martin, 2014;Gnimassoun and Coulibaly, 2014;Lanzafame, 2014;Sahoo et al, 2016;Amba et al, 2017). Narayan and Narayan (2005) investigated whether a long-run relationship exists between exports and imports for 22 least developed countries.…”

Current account sustainability: A non-linear comparative empirical overview

“…In the regarding literature, several studies examine the sustainability of current account deficits by applying unit root and cointegration analysis such as Jyh-Lin Wu, Stilianos Fountas, and Show-Lin Chen (1996), Fountas and Wu (1999), Nicholas Apergis, Konstantinos P. Katrakilidis, and Nicholas M. Tabakis (2000), Paul R. Bergin and Steven M. Sheffrin (2000), Lori L. Leachman and Bill B. Francis (2000), Wu, Chen, and Hsiu-Yun Lee (2001), Ahmad Z. Baharumshah, Evan Lau, and Fountas (2003), Yoichi Matsubayashi (2005), Hamizun Bin Ismail and Baharumshah (2008) and Matteo Lanzafame (2014). In a recent study, Fikret Dülger (2016) highligths the importance of structural breaks in examining the sustainability of current account deficit in a large group of developed and developing countries.…”

Harberger-Laursen-Metzler Effect with Modified Becker-Mulligan Preference by Dynamic Optimization

“…The linearized system associated with the dynamic system (19) and (22) around the steady state is (28)…”

“…In the next two subsections, we analyze the dynamic system (19) and (22) above near the steady state and investigate the existence of the H-L-M effect.…”