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AN EMPIRICAL ANALYSIS OF SUSTAINABILITY OF TRADE DEFICIT: EVIDENCE FROM SRI LANKA

Nelson Perera () and Reetu Varma

International Journal of Applied Econometrics and Quantitative Studies, 2008, vol. 5, issue 1, 79-92

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; 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)
Date: 2008
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