Current account sustainability and nonlinear adjustment

Kurmaş Akdoğan and Jamal Husein

Applied Economics Letters, 2022, vol. 29, issue 13, 1182-1186

Abstract: The existence of mean reversion in current account is examined for 28 countries, using linear and nonlinear unit root tests. The adjustment in current account to GDP ratio could take an asymmetric form depending on the size and sign of the deviation from the equilibrium. The results indicate mean-reversion for three-quarters of the sample. For nine countries, only non-linear tests suggest mean reversion. These results imply that the tests should take into account possible asymmetries in the adjustment behaviour.

Date: 2022
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DOI: 10.1080/13504851.2021.1917761

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