The sustainability of trade balances in sub-Saharan Africa: panel cointegration tests with cross-section dependence

Yoshihiro Hashiguchi and Shigeyuki Hamori

Applied Economics Letters, 2012, vol. 19, issue 2, 161-165

Abstract: This article investigates the sustainability of trade balances in the sub-Saharan African regions, using both the panel unit root (Im--Pesaran--Shin (IPS)) test proposed by Im et al. (2003) and the cross-sectionally augmented version of the IPS (Pesaran Cross-sectional IPS (CIPS)) test suggested by Pesaran (2007), where the former test is based on the assumption of cross-section independence and the latter actually considers cross-section independence. Although the empirical results based on the IPS test indicate that the balance of trade in the sub-Saharan African regions is sustainable, the empirical results of the CIPS test reveal that it is not sustainable. Since Cross-section Dependence (CD) was recognized using the CD test developed by Pesaran (2004), there is a possibility that the empirical results based on the IPS test are spurious.

Date: 2012
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Working Paper: The sustainability of trade balances in Sub-Saharan Africa: panel cointegration tests with cross-section dependence (2010)
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DOI: 10.1080/13504851.2011.570702

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