Cointegration and asymmetric adjustment: Some new evidence concerning the behaviour of the US current account

Mark J. Holmes () and Theodore Panagiotidis ()

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: This study conducts an investigation into the extent of cointegration between imports and exports and asymmetries in the adjustment of the US current account over the study period 1960Q4-2007Q2. We find evidence in favour 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 US exports responding to current account deficits.

Keywords: US 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)
New Economics Papers: this item is included in nep-bec and nep-ifn
Date: 2009-05, Revised 2009-05
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http://econlab.uom.gr/~econwp/pdf/dp1109.pdf

Related works:
Working Paper: COINTEGRATION AND ASYMMETRIC ADJUSTMENT: SOME NEW EVIDENCE CONCERNING THE BEHAVIOUR OF THE US CURRENT ACCOUNT (2009)
Journal Article: Cointegration and Asymmetric Adjustment: Some New Evidence Concerning the Behavior of the U.S. Current Account (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:mcd:mcddps:2009_11

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