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Long-run relationship between exports and imports: current account sustainability tests for the EU

Antonio Afonso, Florence Huart (), Joao Jalles () and Piotr Stanek ()

Portuguese Economic Journal, 2020, vol. 19, issue 2, No 4, 155-170

Abstract: Abstract We assess the sustainability of external imbalances for EU countries using panel stationarity tests of Current Account (CA) balance-to-GDP ratios and panel cointegration of exports and imports of goods and services, for the period 1970Q1–2015Q4. We find that: i) the country panel is non-stationary; ii) cross-sectional dependence plays an important role; iii) there is non-stationarity of the CA, imports, and exports with cross-sectional panel dependence and multiple structural breaks; iv) however, there is a stable long-run relationship between exports and imports in the panel. Hence, trade imbalances can be less unsustainable but this is not sufficient to make current account imbalances sustainable.

Keywords: Current account; Exports; Imports; Unit roots; Cointegration (search for similar items in EconPapers)
JEL-codes: C23 F32 F41 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10258-019-00168-x

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