Current account sustainability in advanced economies

Matteo Lanzafame

The Journal of International Trade & Economic Development, 2014, vol. 23, issue 7, 1000-1017

Abstract: This paper investigates the sustainability of current accounts in advanced economies using a panel of 27 countries and annual data over the 1980-2008 period. Relying on various panel unit root tests and a sequential panel selection method, we find strong evidence in favour of nonlinear but stationary current account trajectories only for 7 countries, while the remaining 20 appear to be non-stationary and thus unsustainable. Our analysis indicates that careful empirical modelling of current account dynamics, particularly in relation to cross-section dependence and nonlinear behaviour, is crucial for appropriate economic policy-making.

Date: 2014
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Citations: View citations in EconPapers (13)

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Working Paper: Current account sustainability in advanced economies (2012)
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DOI: 10.1080/09638199.2013.821152

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