An Empirical Analysis of Sustainability of Trade Deficit:Evidence from Sri Lanka

Reetu Verma () and Nelson Perera ()
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Reetu Verma: University of Wollongong, http://business.uow.edu.au/econ/who/UOW010529.html
Nelson Perera: University of Wollongong

Economics Working Papers from School of Economics, University of Wollongong, NSW, Australia

Abstract: In this paper, the long-run relationship between Sri Lankan exports and imports during the period 1950 to 2006 is examined using unit root tests and cointegration techniques that allow for an endogenously determined structural break. The results failed to support the existence of a long-run equilibrium between exports and imports in Sri Lanka. This finding questions the effectiveness of Sri Lanka’s current long-term macroeconomic policies and suggests that Sri Lanka is in violation of its international budget constraint.

Keywords: Trade Deficit; Exports; Imports; Unit root; Structural Breaks; Cointegration; Sri Lanka (search for similar items in EconPapers)
JEL-codes: C12 C22 F14 F32 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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