Threshold adjustment in the current account: sustainability for danger zone economies?
Applied Economics Letters, 2014, vol. 21, issue 14, 1006-1009
We explore the presence of nonlinear adjustment behaviour in current accounts of 29 countries, using linear and nonlinear unit root tests. Our results suggest threshold adjustment in the current accounts of countries with relatively higher average current account deficits. Nonlinear mean reversion might be an indication of sustainability of the current account for these danger zone economies.
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