On The Sustainability of the EU’s Current Account Deficits

Mark Holmes (), Jesus Otero and Theodore Panagiotidis

Discussion Paper Series from Department of Economics, Loughborough University

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.

Keywords: Heterogeneous dynamic panels; current account sustainability; mean reversion; panel stationarity test. (search for similar items in EconPapers)
JEL-codes: C33 F32 F41 (search for similar items in EconPapers)
Date: 2007-02, Revised 2007-02
New Economics Papers: this item is included in nep-cba
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