Are the U.S. Current Account Deficits Really Sustainable?

Stilianos Fountas and Wu Jyh-Lin

International Economic Journal, 1999, vol. 13, issue 3, 51-58

Abstract: We have tested for a long-run relationship between four U.S. Export measures and analogous import measures (measured in nominal and real terms, levels and deflated by GNP) in the 1967-1994 period using quarterly data. Using various econometric tests that include standard Engle-Granger cointegration tests and two tests that allow for test-determined breaks in the cointegrating relationship, we have shown that the hypothesis of no long-run relationship between exports and imports cannot be rejected. This finding contrasts sharply with earlier literature and carries the important policy implication that US current account deficits are not sustainable. [F30]

Date: 1999
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DOI: 10.1080/10168739900000004

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