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

Antonio Afonso, Florence Huart, Joao Jalles and Piotr Stanek

No 2019/99, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: We assessthe sustainability of external imbalances for EUcountriesusing panel stationarity tests of Current Account(CA) balance-to-GDP ratiosand panel cointegration of exports and imports of goods and services, for the period 1970Q1-2015Q4. We find that: i) the country panel isnon-stationary; ii) cross-sectional dependence plays an important role; iii) there is non-stationarity of the CA, imports, and exportswith cross-sectional panel dependenceand 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.

Keywords: current account; exports; imports; unit roots; cointegration (search for similar items in EconPapers)
JEL-codes: C23 F32 F41 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-eec, nep-ets, nep-int and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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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:ise:remwps:wp0992019

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