Long-run relationship between exports and imports: current account sustainability tests for the EU

Antonio Afonso, Florence Huart, Joao Jalles and Piotr Stanek

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Abstract: We assess the sustainability of external imbalances for EU countries using panel stationarity tests of Current Account (CA) balance-to-GDP ratios and panel cointegration of exports and imports of goods and services, for the period 1970Q1–2015Q4. We find that: i) the country panel is non-stationary; ii) cross-sectional dependence plays an important role; iii) there is non-stationarity of the CA, imports, and exports with cross-sectional panel dependence and multiple structural breaks; iv) however, there is a stable long-run relationship between exports and imports in the panel. Hence, trade imbalances can be less unsustainable but this is not sufficient to make current account imbalances sustainable.

Date: 2019-12-20
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Published in Portuguese Economic Journal, 2019, ⟨10.1007/s10258-019-00168-x⟩

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Related works:
Journal Article: Long-run relationship between exports and imports: current account sustainability tests for the EU (2020)
Working Paper: Long-run relationship between exports and imports: current account sustainability tests for the EU (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02499351

DOI: 10.1007/s10258-019-00168-x

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