Are the current accounts of Asian-5 economies mean-reverting? New evidence from Fourier panel stationarity tests

Jamal Husein, S. Murat Kara and Chuck Pier

Cogent Economics & Finance, 2023, vol. 11, issue 2, 2269758

Abstract: This study offers a novel examination of the mean-reversion properties of the current account balances, expressed as a percentage of GDP, for the Asian-5 economies: Indonesia, Korea, Malaysia, the Philippines, and Thailand. While prior studies mainly employed traditional unit-root tests, our research stands out for its use of novel panel stationarity tests that account for cross-sectional dependence and incorporate both sharp and smooth structural breaks via a Fourier function. Our findings robustly indicate the sustainability of the current accounts of the Asian-5 nations. The emphasis on the significance of structural breaks with a Fourier component sets this research apart, offering fresh perspectives on the intricacies of current account mean-reversion dynamics and the long-term sustainability implications for these economies.

Date: 2023
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DOI: 10.1080/23322039.2023.2269758

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