Cointegration and Asymmetric Adjustment: Some New Evidence Concerning the Behavior of the U.S. Current Account

Mark J. Holmes () and Theodore Panagiotidis ()

The B.E. Journal of Macroeconomics, 2009, vol. 9, issue 1

Abstract: This study conducts an investigation into the extent of cointegration between imports and exports and asymmetries in the adjustment of the U.S. current account over the study period 1960Q4-2007Q2. We find evidence in favor of cointegration through the application of the standard Johansen methodology. Employing the Trace test procedure recursively, two distinct regimes are identified according to whether or not imports and exports are cointegrated. We also consider the Breitung (2002) and Breitung and Taylor (2003) nonparametric cointegration test procedures that do not assume linear short-run dynamics. Further analysis of the asymmetric short-run dynamics reveals that adjustment towards long-run equilibrium is primarily driven by U.S. exports responding to current account deficits.

Keywords: U.S. current account; sustainability; cointegration; structural changes; nonparametric cointegration; recursive Trace test statistic; recursive betas; asymmetric error correction (search for similar items in EconPapers)
JEL-codes: C5 F1 F4 (search for similar items in EconPapers)
Date: 2009

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Related works:
Working Paper: COINTEGRATION AND ASYMMETRIC ADJUSTMENT: SOME NEW EVIDENCE CONCERNING THE BEHAVIOUR OF THE US CURRENT ACCOUNT (2009)
Working Paper: Cointegration and asymmetric adjustment: Some new evidence concerning the behaviour of the US current account (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:bpj:bejmac:v:9:y:2009:i:1:n:23

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